Prepaid Credit Cards for Children Are Good Training Tools

Parents who want full control of their child’s spending may not believe prepaid cards issued to their child is a good idea. But is it a good idea to make all of your child’s decisions?

Experts tell us that children who are not taught to make decisions about spending their money from an early age are very likely to become adults unable to properly manage financial responsibilities.

It’s likely that many adults who are burdened with excessive debt today had no involvement in money management or spending decisions as children.

A child who grows up watching his parents pull plastic cards from their wallet whenever they make a purchase or pay a bill may not grasp the connection between income and spending.

The child may understand the term “no more money to spend” but believe credit cards are the answer when the money is not available. When most of our financial needs were taken care of through our checking accounts, young people learned quickly not to overspend.

They might overdraw their account a few times but eventually they realized the connection between money on hand and expenditures. This is not as readily apparent when credit cards are used.

Prepaid Credit Cards as an Educational Tool

Parents who want their children to be savvy about financial matters may open a prepaid credit card account in their child’s name. The account is funded with an amount of cash chosen by the parent which places a limit on the child’s spending.

Unlike gift cards, the prepaid card carries a well known credit logo such as MasterCard or Visa which allows the card to be used with almost any merchant.


With a prepaid card, children are able to choose where to buy the things they want. With the help of a parent, the child learns to compare prices to get the most for his money.

The card is safe as the most that can be stolen from the account is the limit of funds that remains attached to the card. If a card is lost, one quick phone call will freeze the account and disallow purchases. A new card will be issued and the money can be transferred from the old account to the new one.

There are no fees to worry about. Buying a prepaid credit card can cost as little as $3 with an additional $3 carrying fee per month and there are no interest charges, late fees or over limit fees with such accounts.


There are minimal fees involved but the child should be aware of the fees and understand there is a cost for convenience.

Prepaid cards should not be used to get cash from the account! Pulling cash out defeats the purpose of having a credit card.

The prepaid cards issued to children do not build a credit file for your child. These cards are pre-funded and have no credit issued. Therefore, they are not reported to credit rating agencies.


The prepaid cards are an excellent method parents can use to prepare their child for the real world of using credit.

The purchases of the child can be limited and monitored while at the same time the child can be allowed the freedom of making decisions within acceptable limits.

When providing a prepaid card, it’s best for parents to set up a system for tracking purchases to help the child make the connection between getting and spending money.

Creating a simple ledger where the child is required to enter details of each purchase and subtract the cost from the balance available to spend teaches him more about money management than any parental lecture about thrift.

Properly used, a prepaid card can prepare young people to use credit wisely and eliminate the impression of free money that is often associated with the use of credit cards.