The question above is often asked when a young person wants to use a prepaid credit account. Teens logically assume that by paying in advance to fund a credit card, the age limits no longer apply. However, that logic is faulty.
In the United States, you must be 18 to be able to enter into a legal contractual obligation. This limit protects teens from being conned into payment agreements by unscrupulous companies. If you are under the legal age it will do you no good to apply without parental backing.
Until the economic slowdown in 2008, teen spending rose annually in the U.S. The amount of money available for kids to spend seemed to be limitless and the teen market was a target for many retailers. Kids with jobs and earned income often complained about the unfairness of the required age to obtain a prepaid card.
Unemployment rates have a significant effect on teens as the summer and after school jobs teens are used to are now often filled with adults who are desperate for work of any kind.
This has reduced disposable income for teens. At the same time, families in financial distress can’t afford to provide money for shopping to their teens as they freely did a few years ago.
There have been many complaints from young people about their inability to “qualify for” a prepaid credit card for their own purchases. As these credit accounts do not require a credit file check, it is the age limit that restricts teens from using prepaid cards.
Applications for prepaid cards clearly state the age limit of 18 that is required to get an account in your name.
Teens often apply in spite of the age limit in a belief that “no one will know how old I am”. In this electronic age, you would be surprised at what others can learn about you.
Teens say they were “approved” for a prepaid card but when they tried to activate the card after receipt they were declined. The lender canceled the account and returned the money to the applicant.
Teens can use prepaid credit cards if the parent or guardian applies for, funds and receives the credit card. They activate the card and then give it to the teen to use. Lenders have no problem with that and have allowed teens to be authorized users on standard credit card accounts for years.
It is the adult parent who is making application and taking responsibility for the account. This is important as claims of loss or any other problems with the contractual obligation would then be handled with someone of legal age.
Reasons to Use Prepaid Cards Regardless of Age
It is much safer to carry a small plastic card than to carry cash. Card can be replaced if lost or stolen and can be quickly disabled online to prevent unauthorized use of the account.
Teens learn to be financially responsible when they can use money and make financial decisions of their own. If you allow your teen to shop for school clothes as an authorized user of your regular credit card, it’s easy for him to overspend.
A teen who is allowed to buy his own clothes and necessities with a prepaid credit card must learn to budget as there is a finite amount of spending power for him to use.
The teen years are a good age to obtain a prepaid card. It can be a valuable tool in teaching teens how to budget and manage money and be a lesson that will serve you child well for many years.
However, teens cannot obtain a prepaid card if they are under 18 years of age.
Parental involvement is required but you will have no problems if the parent obtains the card, activates the account and then gives the prepaid credit card to a teen to use for his own needs.