Are you going to give your teen a credit card?

by Rocket Finance

Discover has just released a new product into the marketplace. I don’t have a huge problem with credit cards, however, I ‘m not sure that I will be jumping on this band wagon. Let me explain.

The Current by Discover is a prepaid credit card that is intended for teenagers. The card allows parents to monitor and contr0l spending and set limits and boundaries on their financial habits. Parents can directly deposit money from a bank account or another consumer credit card. The card comes in all sorts of hip designs and a $5 per month or $50 annual fee.

It is unclear to me whether or not a deposit to the card counts as a purchase or a cash advance on the regular credit card. For instance, my Miles by Discover gives me rewards on all purchases. If I get the Current card and load it with a $100, does that count as a purchase and will it generate rewards on my Miles card? Not sure about this.

My thoughts against the Current by Discover card:

My wife and I have to work hard in order to control our credit card spending. It is definitely easier to spend extra money with plastic and I am not sure that I want my child to get used to swiping plastic for everything he wants.

My six year old already thinks that I can buy anything she wants “with the credit card, Daddy”.

Credit cards feed impulse purchases and I don’t know if I want my child to ever purchase anything on an impulse.

My thoughts in favor of the Current by Discover card:

If a child happens to travel by himself a lot. The parent would not have to load the card unless he was on a trip. This might work especially well if there was an emergency flight delay and your child needed to stay overnight in a hotel or airport. You could deposit money to the card that he was carrying and he would not have to depend on emergency cash.

If your child is on a traveling sports team or singing group and needs to purchase food on the road on a regular basis. Once again, he would not have to carry cash or worry about losing the money.

You would have a full accounting of every dime that your child spent in the last month. You could sit down with him and discuss every item. Cash does not have the same accountability.

Personally, I think that the best accountability develops when a child earns, manages and spends his own money. If he earns $50 by mowing lawns, it is up to him whether or not his effort and sweat is worth another video game. He learns to develop a sense of relative value in regards to money.

If you are an ATM parent in the first place – you know, the kind who throws $20’s and $50’s at their children whenever they ask? Then the Current by Discover teen prepaid credit card might actually help you teach your child a little financial self-control.

As long as you promise not to fill it up more than once a month.

  1. One Response to “Are you going to give your teen a credit card?”

  2. By Alex on May 16, 2009 | Reply

    Thanks for sharing. It is useful for everybody.

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