Credit Card Companies Targeting Kids With Prepaid Debit Cards
It used to be that kids wanted a cash allowance - today, they want a credit card of their own.
Credit card companies like Visa and MasterCard are increasingly marketing prepaid debit cards to teens and preteens. And they're convincing parents to buy the cards for their kids by pitching them as an easy way to teach children about finance. But these junior credit cards may be doing more harm than good, say Chicago bankruptcy attorneys.
Because prepaid debt cards can be loaded with a set amount of money, they show kids how to control their spending - at least, that's what credit card companies are trying to convince parents. In reality, the cards come with all kinds of fees - activation fees, maintenance fees, reloading fees, etc - that can leave kids with early debt and Mom and Dad footing the bill.
Today it's not uncommon for kids under 18 to receive credit offers in the mail, or for college students to be baited into signing up for multiple credit cards on campus. When these kids learn that all spending revolves around plastic from a young age, they may not learn to differentiate between reasonable credit and too much debt, or to understand that cash means not paying interest.
Letting creditors teach our kids about money is like letting cigarette companies teach them about health. If you want to give your child a shot at a successful financial future, you need to show her a life without credit first. Set up a free checking or bank account in your child's name and link it to a debit card without overdraft. It serves the same function as the prepaid card, but without the fees - so when the time comes that junior does open a credit card account, maybe he won't be so nonchalant about paying interest.
But it's not just our kids who are without financial guidance nowadays - many of us adults are pretty lost, too. If you're in need of a financial re-education, consider taking our new DebtStoppers Budget Challenge. In fact, maybe your family can work out a budget together. It may give your kids a taste of what real life costs - and encourage them to make a budget of their own. And no matter what your age, know that it's never too late to ask for help. If you're tired of suffering with debts too big for you to handle, consider a free one-on-one debt analysis with a Chicago bankruptcy attorney.