Should my teen have a debit card?

By Citizens Staff

Is a debit card the new must-have for teens, ranking up there with cell phones?

Besides the convenience for making everyday purchases and having easy access to cash at ATMs, a teen debit card can offer teens valuable lessons in financial responsibility.

Most teens want to take the necessary steps to become financially independent when they reach adult age, according to a survey conducted by Citizens and Junior Achievement. A debit card can provide the tool needed to build on lessons about managing an allowance, setting savings goals, evaluating "needs" vs. "wants," and identifying long-term financial goals.

If your son or daughter is ready for this milestone in money management, what should you consider? There are primarily two types of debit cards: prepaid cards and those linked to a checking account. Here's an overview of their features:

Since teens must be 16 to get a checking account at many financial institutions, families who want a card for the younger set can opt for prepaid cards. Parents can preload the card with a set amount of funds and reload the card as needed.

These types of prepaid cards typically let you load a weekly allowance, gifts, or emergency funds directly onto a card. Most charge a nominal monthly fee of about $5 a month for the use of a certain number of preloaded cards per family. The cards allow you and your teen to keep track of finances online and offer helpful features, like a mobile application that can track chores and let you to pay teens when they complete a job.

With prepaid cards, both you and your teen can keep an eye on the account balance and view spending patterns. This offers an opportunity to teach them about real-world budgeting and spending and that even small purchases like buying an ice cream here and a slice of pizza there can really add up. Parental controls and spending limits allow you to monitor how much money they spend and where they spend it. For example, you can limit total daily purchases, or the size of individual purchases.

A prepaid debit card can also eliminate a teen's constant need to ask you for cash. The money is available to them; it's their job to manage it.

When your child turns 16, it's time to consider whether they should open a teen checking account — and if they’re ready for the debit card that comes with it.

Teens must share a joint bank account with a parent or guardian, since many banks require students to be 18 before getting an account on their own (although some banks, like Citizens, will open a standalone account for a 17-year-old; learn more here). A teen account gives your child the ability to set up direct deposit for their paycheck from a part-time job. A linked debit card allows them to pay for essentials, such as gas or a movie with a friend, and recurring monthly expenses, such as music streaming or gaming services.

Teens can check their card balance easily with online banking or a mobile app.^* They can also use the card to enroll with Zelle^® so they can send and receive money with friends and family, or if they want an easy way to split the cost of take-out or delivery and get paid back quickly.

However, some checking account features, such as overdraft protection, may not work as well for a teen account holder. Overdrafts can result in hefty fees, and taking the option off the table can teach a student to live within their means. When their money is gone, it's gone: Having a card declined for a purchase can be a memorable life lesson. (Your teen just may have to wait to purchase those headphones they've been eyeing.)

Another strategy to consider is setting up your teen with two debit cards at this age: a checking account card for regular expenses for which they budget, and a prepaid card with set spending limits from their parents for additional purchases and emergencies.

A related question to the decision about debit cards and teen spending is whether to get your teen an authorized card on your own credit card account.

Learning to use credit without overspending is a great life lesson for your teen, especially since you’ll be able to monitor their spending online and review the statements with them.

However, the purchases teens make as an authorized user on your credit card will add to your interest charges if you maintain a monthly balance. They may also lose track of spending without the finite limits of a checking account balance. You may need to set some ground rules: Does your teen need to get your approval before using the credit card? Is it for everyday expenses, or only for emergencies? And, perhaps most importantly, who pays the bill every month?

One of the many benefits of responsibly using a credit card is the ability to build and maintain credit. However, this is only the case for the primary applicant or co-applicant on a credit card account; it does not apply to authorized users of the card. Once your teen turns 18, they can apply for a credit card in their own name and start building their own credit history — although it should be noted that those under 21 are less likely to be approved for a credit card simply because they have little or no credit history.

Once your teen has a debit card in hand, what should you tell them about keeping this valuable new possession safe?

• Protect those digits: Urge them to not share their card number or PIN with anyone. While it may be appealing to teens to “lend" a friend their card, emphasize that handing someone your debit card isn't like lending them cash. And they should never give their card number over the phone or online, unless they’ve initiated the purchase.
• Watch for fraud: Both you and your teen should monitor their checking account activity online for fraudulent charges. By doing so, your teen can see where their money goes — the first step in establishing a budget. They can also check pending charges and plan ahead to make sure they can cover those expenses, another important aspect to budgeting.
• Hit "'freeze" for lost cards: Most banks allow you to deactivate a card the minute you realize it's missing and reactivate it if you find it at home in a pocket or on your dresser.

A teen debit card can be part of your child's overall money education and a way to raise financially confident teens. It can also help inspire a larger conversation about money that can provide them with the tools to make smart decisions about spending and saving throughout their lives.

Helping your children get ready to embark on their life-long financial journey is a gift. A Citizens Student Checking account is available to children 14-16 with a parent or legal guardian and can provide your child with a convenient and safe place to deposit money.