Are Free Prepaid Debit Cards For Kids a Bad Idea?

swiping credit cardA recent trend has been for parents to get their kids prepaid debit cards. While this may seem like a logical thing to do, there are some major hidden pitfalls in doing so that you should know about.

1st problem: they may not actually be free!

As you can probably guess, most prepaid debit cards have fees… and a lot of them! Activation fees, cash withdrawal fees, monthly fees, and the list goes on. But are there any that are free? Not quite.

You see, most of the “free” prepaid debit cards require a minimum reload amount each month (for example, you might have to add $500 or more every month for it to be free). While that might work for an adult’s spending, as you can see the idea of getting free prepaid debit cards for kids won’t quite work, unless you spoil your kid and he’s a big spender!

2nd problem: prepaid debit is much more risky than credit cards

Another thing to consider when it comes to prepaid debit cards for minors is what will happen if they lose the card? Or worse yet, what if your kid says he lost the card when in reality he used the money for something he doesn’t want you to know about?

With a credit card, federal law limits liability on fraudulent transactions if you lose your card. By law the most the cardholder can be held liable for is the first $50 in fraud on an account, but in actuality, that rarely happens… almost every banks nowadays just takes that hit so the cardholder has $0 liability. Unfortunately prepaid debit cards are something totally different.

If your kids’ prepaid debit PIN number was compromised and funds were stolen, you will probably be out of luck. This is a double-edged sword, because even if you decided to deposit $500+ monthly to be eligible for a free account, at the same time you would be facing higher risk with having that much money in the account.

3rd problem: offer little to no monitoring for parents

As a parent, you probably want to keep tabs on exactly where the money is going if you’re providing them the money! Unfortunately even the best prepaid cards might not be able to give you the type of oversight you were expecting.

With credit cards, it’s possible to have highly-itemized transaction information for both the primary account holder as well as any authorized user (like your kid). You’ll be able to see exactly where they’re spending money by both the store and its category. With prepaid debit, all you may be left with is information like “$40 ATM withdrawal” and the date.

What are the best low-cost options for your kid in 2013?

Just about any major credit card on the market will allow you to add an authorized user (often for free) and you will even be able to set a monthly spending limit for them. For example, even if your credit line is $10,000 you can set it so your child can only spend $200. If you would like, you even be able to add your kid’s SS# to your credit card account so it benefits their credit. Yes, believe it or not, that is possible to do even for minors.

So adding your kid as a user on your credit card account is safer, allows for greater oversight and control, and their spending will earn you rewards (if you have a rewards card) making them clearly a better option than getting prepaid debit cards.

But if you still insist on getting your kid a prepaid card, then I would recommend you check out this prepaid card instead. It is not “free” but the fees are reasonable.
Written or last updated November 16, 2013

The responses below are not provided or commissioned by the bank advertiser. Responses have not been reviewed, approved or otherwise endorsed by the bank advertiser. It is not the bank advertiser's responsibility to ensure all posts and/or questions are answered.

USAA offers a Prepaid Master Card with no fees for kids!! Only catch you have to be a member of USAA (military affiliations). You can monitor the card online and do things such as change pin, suspend usage, add funds, set spending limits, etc. In order to add funds to the card I transfer money from my account to theirs. The card has the child’s name on it. You can use it as a credit or debit card.

I don’t work for the bank. I am just a parent who has a card for her children! I love it!

USAA no longer offers the pre-paid MasterCard, as they change over to VISA.

I am 10 years old and I would like a card where I do not have to enter in My Age, DOB, SSN, and more. I cannot have a credit card or debit card, so I think I want a prepaid card. I get paid for doing something for my mother, and I make enough money to get a prepaid card. I want a prepaid card to save up for something of my own. Know I have something of my own.

Hi I’m 12 and I think I am worthy to have a prepaid card because some moms tell their kids to get a job but they don’t have jobs for 12 and below.

I WAnt a prepaid card back but I don’t know what to look because I want one with No fees

I would go with bluebird from Walmart it is totally free

makeda patterson

I want to get my daughter a pre paid card how do i apply


Christine Williams

Can I look into a debit card for pre-teen my daughter is only 11yrs old but I feel she is responsible enough to the point she wont over do it. Plus she is with me everywhere I go so she won’t be able to mishandle it anyway

Hello i was wondering did you ever find a prepaid card for your child because im trying to find one for my son an he is 10. can u email me back thank you

HI , I am 11 years old also and I have recently discovered pay jr visa , its specially for kids . if not the pay jr visa then there are different free cards available you just have to pay for the reload fee .

in a sort a way I’m getting the feeling you don’t trust your kids

I would rather give kids or students a prepaid card than credit card to spend with. i don’t want to give kids cash bec it might be spent drugs, or a bully might get their cash .. no way. i like prepaid cards for students/kids to protect from bad people …

I think prepaid debit cards are better than giving kids cash but I can see what you mean about a regular credit card being preferable in some circumstances.

This is a great idea. Been meaning to get a card for my kid but wasn’t sure the best way to go about it. Thanks for the insight!