Debit or Credit Card: What’s Best for Kids?

Teaching young kids about money management starts at home. As parents, we set an example of how to earn, save, and spend. All of that impacts the money habits our kids develop and put to use for the rest of their lives. Thus, being intentional with money decisions is essential to teaching kids how to find personal contentment and how to take on financial responsibility.

Technology has changed the way purchases are made and it is easier than ever to get your kids involved in learning about money at a young age. Though kids cannot open a bank account or apply for a traditional credit card until age 18, you may find your kid is mature enough to handle money and credit at some point sooner. Many businesses, including schools, have gone cashless. And, children risk theft or loss when carrying cash. Debit and credit cards, which are widely accepted, provide protections over paper money, as lost or stolen cards can be locked or replaced.

Debit Cards for Young Kids & Teens

Debit cards are linked to bank accounts or prefunded from a bank account, and can be a safer option for kids to learn with rather than introducing them to a credit card. Because debit cards make use of money already in your bank account, no interest will accumulate or have to be paid. Prepaid debit cards may be available to kids as young as five, but debit cards linked to traditional bank accounts typically require the child to be at least 13 years of age.

For the kid just starting to learn about money management, look for a debit card with a parental option. This will give you control over how your kids spend money. Some debit cards allow parents to set category and store level limits, including the ability to block a store or merchant completely.

For the more mature, tech-savvy teenager, look for a debit card geared toward teens ages 13 to17. Parents should be able to monitor balances and get real-time spending alerts. Parents should also be able to control privacy settings and lock the debit card at any time. For the teen with a job, seek a provider with a Direct Deposit feature so that proceeds from paychecks can be deposited directly into a bank account.

Credit Cards for College Students

Student Credit cards are a loan from the issuing bank. This form of plastic comes with an interest rate if balances are not paid in full. Student credit cards typically have lower credit limits than traditional credit cards and are easier to qualify for, with little or no credit history, and proof of student status. Applicants under age 21 must prove sufficient income or have a co-signer to apply for a student credit card.

If your college student is ready to handle credit, several student credit cards offer no annual fees, and some offer perks like cash back and rewards for good grades, or for students traveling abroad, travel rewards and no foreign transaction fees. The three main credit bureaus collect information from student credit cards which is used to calculate credit scores. A higher credit score will position the student for better financial opportunities during their early adult years.