Can prepaid cards help teens learn to manage their money?
Prepaid credit cards have been growing in popularity in the last few years, as access to card-based banking has become an important convenience for many Americans. Prepaid cards can be very helpful to those without credit cards or access to a checking account, enabling them to pay bills online and securely transfer money to a family member. Prepaid cards have also become popular among parents who need to provide their children with some spending money but want to limit access and ability to overspend.
A prepaid card may be tempting for parents who are looking for an easy way to monitor and limit their teen’s spending. Indeed, the cards do prevent costly overdraft fees and can be used in a way that encourages responsible spending. However, unlike cash, there are fees associated with these cards that could end up consuming a large portion of the money added to it. For example, some prepaid cards have activation fees that are as high as $14.95.
Prepaid cards, even the one endorsed by teen idol Justin Beiber, are largely unregulated by the federal government. The Consumer Financial Protection Bureau has caught wind of this problem and is currently taking public comments and appears to be gearing up to issue guidelines, but for now the only regulation in the prepaid market is consumer choice.
This means that in order to find the best deal that makes financial sense for the family, it is necessary to read a lot of fine print. It is also necessary to teach kids about the danger of fees. As with banking fees, small transactions can add up to big losses if the card user isn’t conscientious about fees.
When fees and interest rates add up, Atlanta consumers could wind up in a tough financial situation, even if they have been planning carefully. Falling behind on loan payments or not having access to cash to pay important bills can be a very stressful situation. For those who are unable to continue to keep up with financial demands and who do not have sufficient income to bounce back on their own, bankruptcy is an option to help resolve debts.
Source: USA Today, “Are prepaid cards and teens a trustworthy mix?” Susan Tompor, April 20, 2013.
Information about declaring bankruptcy can be found on our law firm’s website.