Even as consumers try to unload credit-card debt -- and card issuers try to unload high-risk borrowers -- some banks are still trying to get teenagers hooked on plastic.
"Call it plastic on training wheels!" chirps the press release for the new Current Card by Discover, the latest debit card aimed at "kids, tweens and teens." I've never been a fan of these cards, and I like them even less given the current economic climate.
The idea is that parents deposit money in the card account, which the kids can use to buy stuff or make withdrawals from ATMs. The cards tout selling points designed to appeal to parents. "Unlike cash," says the press release, "the Current Card gives teens a better way to track and manage their spending while developing smart money-management skills."
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
In addition, parents can monitor spending online or via e-mail, set spending limits and block certain merchant categories. Sorry, but I'm not convinced. Here's why.
- Debit cards encourage kids to spend. Despite their lofty goal of teaching young people to manage money, they really make it easier for kids to spend it. With the Current Card, for example, teens are eligible for "members-only" in-store coupons and online discounts when they use their cards at select restaurants, movie theaters and other "teen-friendly merchants."
- To kids, plastic is plastic. These cards aren't credit cards, but young people don't draw a distinction. To them, any plastic is magic money that's meant to be topped up by Mom and Dad when it runs out.
- Parental controls are overrated. Letting children make choices about how to spend their own money is a good thing (see Dear Sasha and Malia). But parents don't need to know whether the kids choose to eat at McDonald's or buy a pair of jeans. You certainly don't want them to buy things that are inappropriate or illegal. But if you're worried they'll spend money on Internet porn, they shouldn't have a card in the first place.
- The fees are high. The Current Card levies a monthly charge of $5, or $50 a year. That's a lot to pay to track your kids' allowance when as adults you can get a checking account for free or a credit card with no annual fee.
I have always recommended that kids be given a cash allowance, and that goes double now that cash is cool again. There's nothing more real to a kid (or an adult, for that matter) than paying with hard currency and taking a direct hit to the wallet.
If you really want your teens to enjoy some of the convenience of plastic, you can always arrange for them to have an ATM card with access to a bank savings account. That's how my son managed his money throughout high school, depositing his paychecks and making withdrawals when he needed cash. When he turned 18, I offered to get him a real debit card. He declined. "It would be too easy to spend money," he told me.
-
Are You an Estate Planning Procrastinator? Where to StartQuit putting it off, because it's vital for you and your heirs. From wills and trusts to executors and taxes, here are some essential points to keep in mind.
-
Write a Book in One Day and Become a Best-Selling Author!If that sounds like a scam, that's because it is. Online publishing scams entice wannabe authors with big promises for a big price. How to protect yourself.
-
How to Motivate Kids to Savepersonal finance It's not easy teaching your child to save. Here are some ways readers have incentivized their kids to keep track of their finances.
-
Lessons for Kids From the Crisissavings One of the greatest opportunities presented by the pandemic is to give children an appreciation for the workings of the economy.
-
Why Financial Education Workscollege Money skills learned young will pay off in the long run.
-
The Tooth Fairy Is Leaving Less Under Pillows These Dayssavings The average amount that the Tooth Fairy gives kids is down 10% from last year.
-
The Value Test: 300 Colleges That Pass
College Rankings All the schools on our list, from 1 to 300, are best values.
-
6 Ways to Get Your Kids to Do Chores Without Paying Themspending Kids shouldn't be paid for doing routine tasks, but for doing extra jobs that parents define as above and beyond.
-
Save $1 for College, Cut $2 in Debt
college Paying for college doesn't mean you have to take out thousands in student loans.
-
Back-to-School Money Tips for College Students
college Kiplinger's summer 2015 interns offer advice on managing your finances as a student.
