Author Topic: Debit Card for Teen: What do I need to know?  (Read 3583 times)

begood

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Debit Card for Teen: What do I need to know?
« on: July 30, 2016, 11:07:21 AM »
We are considering getting our almost-15-year-old daughter a debit card. She currently has a savings account but no checking account. She usually saves about 75% of her hard-earned cash (catsitting, mostly, but she also just sold her first piece of art!).

Starting next year, she'll be a lot more independent because she'll be boarding at school. I want to use this year to get her accustomed to the debit card, how to get cash, how to keep track of what she's spent, et cetera.

Any pitfalls to watch out for? I will set daily limits for spending and ATM withdrawal, and I'll set up text alerts so I see if there's any wonky activity. And I'll make sure there's fraud protection on the account.

Beyond that, what do I need to watch out for? Could someone clean out her entire account *and then some* and lead to overdrafts? Or do those daily limits prevent that from happening?

My husband and I *only* use our debit card for ATM withdrawals. I don't like debit cards, generally speaking, because credit cards offer so much better protection. But I'm hesitant to get a young teen a credit card...

I'm open to suggestions!

Bracken_Joy

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Re: Debit Card for Teen: What do I need to know?
« Reply #1 on: July 30, 2016, 11:59:41 AM »
There are CCs with low limits you can get. When I was 16, my parents helped me to open a 7% CC with a $2000 limit on it through our Credit Union. I have never carried a balance, and I am incredibly grateful they helped me set up my credit at such a young age.

So unless you really don't trust your daughter, I would say give her a short leash and see how it goes. CCs have much, much better fraud protection.

Kwill

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Re: Debit Card for Teen: What do I need to know?
« Reply #2 on: July 30, 2016, 12:11:08 PM »
Especially if her savings is mostly from her own earnings, it seems like a checking account would be good practice.

If something happens and she needs money for an emergency when she can't reach you, a credit card could be helpful. But I think it'd be better to get her a credit card where she gets the bill and sees what interest does, not a credit card where the bills go to Mom and Dad so that everything is "free." When I went off to college, I got a student credit card with a $500 limit and my father as a cosigner. The bills came to me, and I got used to how it worked. I know others who went off to school with a credit card from parents, and it was a different situation.

At least if she messes up with credit at 16, she'll have some years to get herself sorted out before she is looking for a serious job or buying a house.

letired

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Re: Debit Card for Teen: What do I need to know?
« Reply #3 on: July 30, 2016, 12:46:56 PM »
So unless you really don't trust your daughter, I would say give her a short leash and see how it goes. CCs have much, much better fraud protection.

Ditto the fraud protection. There are a lot of 'prepaid' credit cards that might also be a good option. Learning about using a CC and paying it off every month is a really valuable lesson.

Shinplaster

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Re: Debit Card for Teen: What do I need to know?
« Reply #4 on: July 30, 2016, 12:47:28 PM »
We got our son a Visa card when he was 16.  Our bank usually didn't give cards to students in high school without a co-signer, but since we knew the manager, they bent the rules a little.  Put a $300 limit on it for the first 2 years, but it was entirely in his name.  He was generally responsible for paying it off, but showed us the confirmation of the pay off every month. When he went off the rails a bit (only a couple of times), we were able to talk to him about why that was bad, and how he could get back on track.  While he was in university, it was easy for us to throw money on the card for books, etc.  He's now in his 30's, and says he is very grateful we started him out this way.  He already had a great credit score by the time he graduated from university, unlike his friends who were scrambling to establish credit as they searched for jobs, etc.

GizmoTX

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Re: Debit Card for Teen: What do I need to know?
« Reply #5 on: July 30, 2016, 01:58:08 PM »
We had DS open a no fee checking account when he was 15 at the same bank where we already had a relationship. Due to his age, we had to be on the account as well, which meant I could monitor it online & told him we would. The bank usually issues a only a debit card to high school students, but I insisted on their "college checking" which included paper checks as well as a debit card. An individual can't accept a debit card for payment, & everyone needs to understand how to handle checks, deposits, & reconcile an account. When DS was 17, we asked the bank to add a no fee, low limit credit card for purchases such as gas or clothing while limiting fraud. Again, this was linked to our online account, but he was expected to pay off the balance in full & on time every month, which he has done (he's now almost 23). I don't see how a young person learns to manage an account or limit spending if parents are making the payments. DS built his credit history & has since been able to open 2 other credit cards entirely in his own name & with better rewards (the first CC has now been closed to get us off it). This year DS started using YNAB, which I highly recommend.

Bottom line: a teen is the perfect age to start really managing money, but step by step with plenty of parental oversight & coaching.

begood

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Re: Debit Card for Teen: What do I need to know?
« Reply #6 on: July 30, 2016, 03:21:02 PM »
Thank you all for your perspectives and advice! I'll ponder the idea of a low limit credit card that's still linked to our account, and I'll go read about the 'prepaid' credit card option. If she loses the card, for example, would the money still be available to her with a replacement card?

She is responsible, but she's also 14. I want her to learn and not get frustrated.

I have an Amazon Visa card that I'm not using. It has waaaaaaaay too much credit, so that would have to change, but I wonder if I could get her name added to the account and get a card in her name. The bill would be all hers, since I'm not using the card, and I could show her how to transfer money from her savings account to our checking account each month to cover the charges.

We started her off by with loading $15 on the Starbucks app on her phone. I know, I know, but just hear me out. Her dad loaded another $15 this past weekend, and she said she didn't know where the previous $15 had gone, so she went back through her purchases, and sure enough, they added up to $15. While Starbucks is of course spendypants galore, it taught her the "little things add up" lesson in ways hours of lectures from me never would have. Money well spent, I say.

Kwill

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Re: Debit Card for Teen: What do I need to know?
« Reply #7 on: July 30, 2016, 03:33:12 PM »
Thank you all for your perspectives and advice! I'll ponder the idea of a low limit credit card that's still linked to our account, and I'll go read about the 'prepaid' credit card option. If she loses the card, for example, would the money still be available to her with a replacement card?

She is responsible, but she's also 14. I want her to learn and not get frustrated.

I have an Amazon Visa card that I'm not using. It has waaaaaaaay too much credit, so that would have to change, but I wonder if I could get her name added to the account and get a card in her name. The bill would be all hers, since I'm not using the card, and I could show her how to transfer money from her savings account to our checking account each month to cover the charges.

Maybe your first idea about just a debit card was better, actually. Somehow I was thinking she was nearly 16 instead of nearly 15, which seems like a big difference. It might be easier to use a credit card after having a debit card for a year or two.

MoonLiteNite

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Re: Debit Card for Teen: What do I need to know?
« Reply #8 on: July 30, 2016, 03:56:15 PM »
When i was 14 my parents said "you want your own card?".
We went to the bank, opened up the account (already had savings) moved 0% of the money and i was told "ask if you need help".

And that was it.... i never moved the money over, i just kept on saving :) about 8 years later, i had almost 20k and put a nice downpayment on a house..

I think the best training is letting her help and see your money, your accounts, how you do things. That was my training i guess. And i feel it was the best education on money that i ever had.
« Last Edit: July 30, 2016, 03:57:46 PM by MoonLiteNite »

letired

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Re: Debit Card for Teen: What do I need to know?
« Reply #9 on: July 31, 2016, 11:54:41 AM »
If she loses the card, for example, would the money still be available to her with a replacement card?

For the type of card I am thinking of, 'secured' might be the right search term. It acts and is reported to credit agencies exactly like a credit card, but the spending limit is 'prepaid'  and limited to how much you give the company in advance. I'm not thinking a gift-card type thing.

good luck! It's important to teach these lessons early!

begood

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Re: Debit Card for Teen: What do I need to know?
« Reply #10 on: August 20, 2016, 11:41:04 AM »
UPDATE:

Okay, so we did get our daughter a debit card. We had to open a checking account to do so - otherwise the debit card would really only be an ATM card and she could only use it to get cash. I want her to start to learn a little more than just that, and cash runs through her fingers like water.

We seeded the checking account with $300 but explained that that is not for her to spend; it's the "floor" and she should always plan to keep the account balance above $300. If it's getting close to $300, it's time to transfer more money from checking.

We set the limits on the debit card to $100/day for purchases and $60/day for ATM withdrawal.

She used the card for the first time on a shopping trip with friends and spent $16.01. The clerk at the store told her she did NOT need to put in her PIN. What the heck? Is it because the purchase was below a certain amount? I told her she should always put the PIN in.


Tjat

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Re: Debit Card for Teen: What do I need to know?
« Reply #11 on: August 20, 2016, 12:35:23 PM »
Sounds like you got her a check card instead...meaning it can be swiped as credit, but functions otherwise like a debit card. I would've voted for a secured credit card, but another thing you can do is teach her to track and categorize spending. Calculate savings rate, net worth etc

begood

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Re: Debit Card for Teen: What do I need to know?
« Reply #12 on: August 20, 2016, 01:21:22 PM »
Sounds like you got her a check card instead...meaning it can be swiped as credit, but functions otherwise like a debit card. I would've voted for a secured credit card, but another thing you can do is teach her to track and categorize spending. Calculate savings rate, net worth etc

Yes, Tjat, on the record in online banking, it says "check card". That feels less secure than a card where a PIN has to be entered. If it were ever stolen, there's one less hurdle a thief would have to leap to access her hard-earned funds. Anything to be done about that? Can I *require* a PIN on that card?

MoonLiteNite

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Re: Debit Card for Teen: What do I need to know?
« Reply #13 on: August 21, 2016, 12:08:26 AM »
UPDATE:
 The clerk at the store told her she did NOT need to put in her PIN. What the heck? Is it because the purchase was below a certain amount? I told her she should always put the PIN in.

PINS are up to the retailer.
It is just another way of them trying to fight charge backs. Most have their limits as they rather keep happy shoppers by not requiring them to enter in a PIN.

poppan

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Re: Debit Card for Teen: What do I need to know?
« Reply #14 on: August 21, 2016, 01:54:57 AM »
Debit check cards have a Visa symbol on them and can be run as "debit" (requires PIN) or "credit" (requires signature only if above a certain amount -- usually around $25). Many stores automatically run it as credit and not debit, especially places at the mall.

The only other option is an ATM only debit card (no Visa symbol), which can only be used to withdraw cash.

You've put some limits on, but have you shown her a specific way to budget and track spending? You've said that cash just flows through her fingers and she didn't know where the $15 Starbucks credit went. Without more concrete budgeting instruction, I am not sure how she will learn it?

begood

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Re: Debit Card for Teen: What do I need to know?
« Reply #15 on: August 21, 2016, 08:02:24 AM »
One of the big drivers for getting the debit card was to create a way of tracking expenses, poppan. With cash, it's just *poof* gone. We've told her to keep the receipts until her statement comes, and we'll show her how to reconcile the account.

MrsPete

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Re: Debit Card for Teen: What do I need to know?
« Reply #16 on: August 21, 2016, 09:33:31 PM »
Just before I started my senior year in high school, my mom took me to the bank, helped me open a checking account -- and then monitored my usage in that last year I lived at home.  I went away to college and knew how to manage a checking account; unlike most of the other girls in my dorm, I never bounced a check. 

I did the same thing for my children, BUT since times had changed, they also got debit cards attached to their checking accounts and a small credit card ($300 maximum balance).  Just like my mom, I monitored their usage during their senior year of high school. 

Both of my kids learned quickly and have managed their money well.  They're both quite thrifty. 

Hints on doing it well? 

- Talk to them about how to use it.  Don't assume they understand the logistics of why a charge they made this morning doesn't yet show up on their account.  When the statement arrives in the mail, sit down and walk them through the balancing process; really I only had to help with this once, but I still made sure they did it every month.
- Don't forget to teach your daughter how to check her account(s) online.
- I gave my kids an allowance once a month, and it had to cover certain necessities (school supplies, toiletries, and a few other things) as well as their own fun. 
- $300 seems to be the perfect amount for a teen credit card limit.  It's enough that they can buy a few things ... and IF they get out of hand, it's not going to hurt you too much, and it's an amount they can be expected to pay back -- it'd sting, but not hurt long-term. 

gardeningandgreen

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Re: Debit Card for Teen: What do I need to know?
« Reply #17 on: August 22, 2016, 11:53:38 AM »
UPDATE:

Okay, so we did get our daughter a debit card. We had to open a checking account to do so - otherwise the debit card would really only be an ATM card and she could only use it to get cash. I want her to start to learn a little more than just that, and cash runs through her fingers like water.

We seeded the checking account with $300 but explained that that is not for her to spend; it's the "floor" and she should always plan to keep the account balance above $300. If it's getting close to $300, it's time to transfer more money from checking.

We set the limits on the debit card to $100/day for purchases and $60/day for ATM withdrawal.

She used the card for the first time on a shopping trip with friends and spent $16.01. The clerk at the store told her she did NOT need to put in her PIN. What the heck? Is it because the purchase was below a certain amount? I told her she should always put the PIN in.

A check card and a Debit card as far as a bank is concerned is exactly the same thing. They can be used interchangeably. If she is swiping her own card most places have the option of debit or credit. If you want her to be able to put her pin in then she should always be doing debit. Unfortunately the best way to avoid fraud is to be checking your accounts often and report anything fishy immediately. If someone steals her card number the bank will shut down that card and investigate the purchases. They legally she will get her money back within 10 business days of reporting the fraud. Also keeping most of her money in her savings account helps with this as well. If the money is in savings and the debit card gets stolen then the fraudster wont be able to touch that money.