There are various advantages to giving your child a prepaid card. It lets you introduce them to cashless payments, financial management, and the banking system as a whole.
With that said, you might run into some issues while researching prepaid credit cards for teenagers, as this is a common misnomer—prepaid cards are different from credit cards, as you’ll see in this guide.
Besides this difference, you’ll learn the following:
- How your child can benefit from a prepaid card
- How to choose the right card
- What else you can do to support your child’s financial future
Teen Prepaid Debit Cards vs. Credit Cards
A prepaid card is a card you load with funds and can use as you please. Credit cards involve money borrowed from a bank, so they technically can’t be prepaid. The closest equivalent would be a secured credit card, where you pay a deposit that typically serves as a credit limit. Still, the money on the card isn’t yours and needs to be paid back.
Understanding this difference is important because most teens can’t obtain a credit card. The CARD Act of 2009 prohibits lenders from issuing them to anyone under 21 unless they meet one of the two criteria:
- A proven ability to make payments independently
- Having a co-signer over 21 who can be held accountable for the debt
Unlike credit cards, prepaid cards are easily accessible to most teens. There aren’t many restrictions besides the potential age limit, so you shouldn’t have trouble getting a prepaid card for your child if they’re eligible. Once they receive one, they can reap the many advantages of using plastic over cash.
Benefits of Prepaid Debit Cards for Teens
Source: Clay Banks
There are numerous upsides to giving your teen a prepaid card, most notably:
- Hands-on financial education
- More independence without excessive risks
How a Prepaid Debit Card for Teens Helps Your Child Learn About Money
Your child will almost certainly get access to a debit card sooner or later, so getting a prepaid card in their teens is an excellent way to learn the ropes under your supervision.
When the card arrives, teach your child about the following:
- Mobile transfers
- All applicable fees
- ATMs and withdrawals
- Cashless/contactless payments
The general mechanism of a prepaid card is easy to grasp even if your child is young, so they should climb the learning curve without issues.
Instead of giving your child a cash allowance, you can send money to their card. This is an excellent opportunity to teach them about saving and proper financial management, which will be crucial when they get a job and start earning income. If you instill healthy spending habits into your child while they’re young, they’re more likely to stay responsible later on.
Debit Cards Are Safer Than Cash
Carrying cash around can be quite inconvenient and risky, especially if you give your child a larger sum. There’s always a chance of them losing the money, and that can be frustrating.
A prepaid card can minimize this risk—even if your child loses it, you can freeze the card to ensure the funds stay on it. The card can be unfrozen when found, or you can request another one from the bank. Either way, the funds will be safe from theft.
Contributing to Your Child’s Independence Without Risks
Whether your child travels, goes to college, or isn’t home for any other reason, a prepaid card can be quite beneficial. If they need some urgent money, you can send it instantly. Such peace of mind isn’t possible with cash and is among the main arguments in favor of a card.
Your child will always be limited to their available balance, so there’s no risk of excessive spending that a credit card would enable.
Some prepaid cards also come with restrictions that could be useful until your child shows enough responsibility. Such options are typically geared toward minors and can’t be used in off-licenses, betting sites, or even specific retailers and online stores you select.
Thanks to the above benefits, a prepaid card can boost your child’s independence while still giving you enough control to ensure they stay disciplined.
How To Choose a Teen Prepaid Debit Card
Source: Liza Summer
Numerous financial institutions offer prepaid cards for teens, so choosing the right option might be a bit overwhelming. The following table outlines the main features you should focus on to make the search easier:
|What To Consider||Overview|
|Fees||While some prepaid cards are free, most come with a monthly or annual fee. You might also incur reload and transfer fees, so shop around to find the most affordable option|
|Parental controls||Besides restricting certain purchase types, you should be able to set spending limits to ensure your child stays responsible|
|Financial education tools||Prepaid cards can offer various financial education resources and tools. For instance, some options let you connect the card to a chore list the child has to complete before you load their card|
|Loading options||Loading options can vary between cards, so make sure your chosen card supports the most convenient methods, such as simple bank transfers through a phone app|
|Payment methods||A card’s supported payment methods depend on your location and the provider’s integration with large financial services. If your child will use a digital wallet like Apple Pay or Google Pay, make sure such methods are available|
Best Prepaid Debit Cards for Teens—Three Options Reviewed
Now that you know what to look for in a prepaid card, you can explore different providers and compare your options. To give you a starting point, we’ll go over three popular options:
Greenlight combines an educational app with a prepaid card, letting parents familiarize their children with the banking system and show them the value of earned money. It doesn’t have any age restrictions, so it’s suitable for all children and teens.
There’s one app for parents and children, but the login details and interface are different. If you log in as a parent, you can create chore boards, load your child’s card, and set various restrictions. Your child can log into the app for an overview of their funds and chores alongside financial lessons and management tools.
Greenlight offers three monthly subscriptions:
All plans support prepaid cards for up to five children, so the value for money is decent if you have multiple teens. Otherwise, Greenlight might be too pricey, especially since the Core plan is a bit limited.
If you go with Max or Infinity, you’ll get several handy features, most notably:
- Location sharing
- Comprehensive protection measures
Regardless of the plan, you need to connect a bank account or debit card to load your child’s card. You can’t use a credit card or third-party services like PayPal, which some parents might find inconvenient and limiting.
The following table summarizes the benefits and shortcomings of Greenlight:
|Robust educational tools and features|
No age restrictions
|No free option|
Limited basic plan
Loading limited to bank accounts and debit cards
GoHenry Prepaid Card for Teens
Similar to Greenlight, GoHenry offers a full-featured money management and education app alongside a prepaid card. This option might be more restricted, though, as it’s only available to children ages 6–18.
Your child can start learning about financial responsibility through Money Missions—a set of interactive lessons covering various topics like saving, investing, and sensible spending. They can watch videos and take quizzes, which can make the experience fun enough to get the child interested in financial matters early on.
Even though the card isn’t connected to a bank account, your child will be eligible for direct deposit when they turn 14, so they can get paychecks straight to their card. There’s also peer-to-peer sharing, so your child can send and receive funds from their friends.
You’ll have a clear overview of all transactions and get real-time notifications, so you can stay on top of your child’s spending. You can also leverage numerous parental controls and GoHenry’s automatic blocking of “over 18” merchants.
There’s only one monthly plan, coming at $4.99 per child, but families of up to four children can sign up for $9.98 per month. This makes GoHenry pricier than many competitors, so it might not be the best option for parents on a budget.
Check out this table for a short breakdown of GoHenry’s pros and cons:
|Interactive financial lessons|
Direct deposits for teens over 14
Automatic blocking of adult sites and merchants
|Only available to children ages 6–18|
More expensive than many competitors
FamZoo claims to have “invented the first educational prepaid card product.” It’s another comprehensive solution encompassing various features you expect from a prepaid card, plus a few useful extras.
A standout feature is the ability to split payments into four categories:
This is a great way to help your child practice proper financial management and stay mindful of where their money is going. You can also set up parent-paid compound interest and reward your child for saving money to incentivize frugality.
FamZoo also added an interesting twist on chore setup—chore failure. It lets you remove funds from your child’s card if they fail to meet the agreed-upon obligations. It’s a handy feature for penalizing irresponsible behavior and keeping your child disciplined.
You don’t need to link a bank account or debit card to load your child’s card. Cash reloads are available with FamZoo’s approved partners, but you’ll incur a fee of up to $4.95. Withdrawals are also charged because the platform doesn’t have a no-fee ATM network, so your child’s funds might deplete more quickly if they take out cash frequently.
Much like GoHenry, Famzoo only offers one plan—$5.99/month. It’s more cost-effective, though, as you can add up to four prepaid cards for the price. You can also save up a bit by prepaying for the plan, in which case you have three options:
- Prepay 6—$25.99 for 6 months
- Prepay 12—$39.99 for 12 months
- Prepay 24—$59.99 for 24 months
For a quick overview of FamZoo’s benefits and drawbacks, see the following table:
|Parent-paid compound interest|
Chore failure option
No bank account needed for reloads
|Cash reload fees of up to $4.95|
No fee-free ATM network
When To Get a Prepaid Debit Card for a Teenager
Source: Anete Lusina
There’s no universally recommended time to give your child a prepaid card. If they show interest in managing their finances—and you believe they’re ready—you can take one out even if they’ve only entered their teens.
The main reason for this is the low risk associated with the card. Most options give you a high degree of control over your child’s finances while still providing them with enough independence. Still, you should be wary of a few downsides of prepaid cards to get the full picture before making your decision.
Drawbacks of Prepaid Debit Cards for Teenagers
Switching from cash to plastic might take some getting used to. Your child might have a distorted perception of money if they can’t physically see it, especially at the beginning. This might cause them to burn through their funds faster.
Card fees exacerbate this issue, as they can stack up with time and put a dent in your child’s budget. They’ll have a new expense to take into account that they didn’t have to worry about when using cash.
Besides the above-mentioned, the main downside of using a prepaid card is that it doesn’t help your teen establish a credit profile. The importance of your child’s credit increases as they approach adulthood, and a prepaid card won’t contribute to it because the spending activity won’t be reported to the credit bureaus.
An alternative some parents choose is adding children as authorized users of their credit cards. While doing so does give your teen a credit profile, it’s not the best decision for several reasons:
- You need to have a credit card and good credit. If you miss or make a late payment, it will negatively impact your child’s credit profile
- You’d have to give your child access to your credit card, which exposes you to a risk of significant debt
- Your child will inherit your credit history, and spending issues on anyone’s part can damage both profiles
- When you remove the child from your card, credit activity associated with it gets deleted from their profile, so they have to start over
With all of the above in mind, a prepaid card is a good short-term way of teaching your children about money and contributing to their independence. If you want to go a step further and help your child secure long-term financial stability, check out FreeKick.
FreeKick—Parent-Sponsored Credit Building for Teens and Young Adults
Powered by Austin Capital Bank, FreeKick is a combination of a Federal Deposit Insurance Corporation-insured (FDIC-insured) deposit account and credit-building services.
You can create an account in three steps:
- Make a Deposit—Choose a plan based on a one-time FDIC-insured deposit with a 12-month commitment:
- Set It and Forget It—When you open the account, FreeKick will build 12 months of credit history for your child with no ongoing actions required from you
- Keep Growing—When the 12-month term ends, you can renew the account for another 12 months or cancel it and receive your deposit back
Your teen will start building a credit history as soon as you open the account. If they’re a legal adult (18 or over in most states), FreeKick will start reporting their payments to the three nationwide consumer credit bureaus. FreeKick can also build a credit history for minors (ages 14–17), but it will be reported once they reach legal age because credit bureaus only accept reporting for adults.
You can close the account at any point, but if you do it while your child is a minor, no credit history can ever be reported for the account (for the above reason).
FreeKick also offers credit profile monitoring to keep track of your child’s sensitive information, and the service is included with the account.
To safely and reliably help your child build credit while keeping their credit profile monitored, sign up for FreeKick.
Featured image source: Blake Wisz