Pre-paid Credit Cards for Teens

Prepaid cards have only really started to be widely used in the last year or two, and initially they were seen mostly as a way for people who couldn’t get a credit card because of having a poor credit rating to have a credit style card, but where they couldn’t build up any debt.

They are indeed excellent for this purpose, however, more and more people are using them today regardless of whether their credit rating is poor or good. One reason for them popular is that they allow parents the chance to teach their kids simple money management techniques in a controlled way.

By giving your teenager a prepaid credit card to use for their spending you give them access to a much wider range of places to buy from allowing you to help them realise that searching for the best price is important. It lets you help them to learn to use a credit card in a sensible way without any risks of debt being involved, steering them when needed and helping them so that when they come to manage their own money when they fly the nest, they are much better prepared financially.

Prepaid cards work in a simple and quite easy to understand way. You decide how much money you want to be able to spend on the card (or how much you want your teenager to be able to spend), and you load the card with money to this level. From here on, because these cards are normally backed by Visa or MasterCard, they work in much the same way as a regular credit card in terms of your buying power. You can book a concert ticket with it, do your shopping online or in the high street etc. The biggest difference is that when you buy something, the money is taken off the card (like it would be with a gift card), rather than you building up a debt that you have to pay back afterwards. When the card is empty, you will then need to re-load it with money before you can spend any more.

Of course there are still fees involved, but these are usually much easier to work out and you pay them as you go along so that there is never any debt involved. Most cards like the o2 money card and the Canton card an activation fee when the card is set up, and then there are two main routes that they take. Either, they will charge you a monthly fee to have the card (this is taken from the balance of the card each month) or you pay a small amount of interest every time you purchase something. In this case, the interest fee is taken at the same time as you make your purchase.

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