Teens Should Use Checking Accounts
With a significant amount of college students graduating with credit card debt, it is wise to teach kids about finances from an early age. Providing them with checking accounts over prepaid cards may be a good start.
Prepaid cards cost users extra money, as they are continually charged fees for reloading, as well as for owning the card each month and every year as well, Tim Chen, chief executive officer of NerdWallet.com, told Business Insider. Checking accounts for teens do not cost any money, and because some come with savings accounts, it can teach the importance of saving at an early age.
Three of the top four credit card issuers provide debit cards specifically for those who are new to finances - Visa, MasterCard and American Express, Chen said. These cards do not overdraft, are easy to deposit money on and do not affect a child's credit score. Prepaid cards may tout the same perks, but overall may not be worth the trouble when it comes to extra fees.
If parents prefer to help kids build credit early, there are many low-line card options available if they get a co-signer, Chen added.