Ready to equip your kid with a debit or prepaid spending card? Here's what to know before you commit

Debit and prepaid cards offer spending convenience for parents and kids alike. To find the best one for your needs, look for products that allow you to monitor spending, set limits, and easily transfer or add money.

• Prepaid and debit cards give a child or teen easy access to cash on hand. 
• The type you select will depend on your child's age and what you're trying to achieve by providing them a card.
• Before you choose, look at convenience, spending controls, account protection, and fees.

Cards that allow cashless transactions are both practical and educational for kids and teens. Whether a traditional debit card attached to a checking account, or a prepaid card parents can load for spending, they can give kids a sense of financial freedom and parents and kids the conveniences needed for spending and buying in a modern world. Both types of cards come with benefits, risks, and limitations. 

Debit cards vs. prepaid cards for kids: At a glance

• Debit cards for kids and teens can be acquired through a custodial checking account, or if they are old enough, an account in their own name. 
• Prepaid cards for kids and teens are frequently designed to make it easy for parents to monitor and manage transactions.

A debit card is a tool to access money from a linked checking account. A prepaid card is a tool to access an amount of money preloaded onto the card. Either may be presented for payment in much the same way a credit card is at the point of sale for purchases. But instead of buying on credit, the transaction depletes the money that's either in the associated checking account or on the prepaid card. 

"Neither option is inherently better than the other," says Rod Griffin, senior director of consumer education and advocacy for Experian. "It really depends on the age of the child and the goal the parent has."

How do debit cards for kids work?

Debit cards allow the cardholder to make purchases in stores or online and withdraw money from ATMs. Each transaction spends down money held in a checking account with the issuing bank or credit union. While a PIN code can be used to authorize transactions, many debit cards can also be used as credit cards at the point of sale. Regardless of whether the transaction is charged as a credit or a debit, the money spent will be pulled from the associated account. 

Older teens who have started working can enjoy the convenience of having their paychecks directly deposited into a checking account in their name, along with the independence of having access to their money via a debit card. You'll want to look for an account that has low balance requirements, low or no fees, and earns some interest. Also, ask if you can opt out of overdraft protection, as overdraft fees and fees for insufficient funds can quickly add up.

Debit cards for kids example

Wells Fargo requires minors to be at least 13 before they can be a primary account holder. A parent is still required to be on the account, but as long as the account is in the child's name, the $5 monthly service fee is waived until age 25. Other banks have products that allow younger account holders. Chase First Banking is geared for ages six to 17, while CapitalOne Money Teen is available for ages eight to 18. 

Accounts should offer convenient access for both the parent and their child. Look for online banking services that allow for balance inquiries, transfers and deposits, and for customer-friendly mobile apps. Text alerts and parental controls, like the ability to set spending limits, are also useful.

How do prepaid cards for kids work?

Prepaid cards for kids work differently from traditional debit cards. They are detached from a checking account and are usually funded by a parent's main account, from which money is loaded, or transferred, to each card-holding child. There are no overdraft fees since kids can't spend what's not there.

Popular prepaid cards have mobile apps that cater to both parents and kids. On the apps, parents can transfer money into the account, send money to their children, set spending limits, and block specific merchants as needed. Kids can check balances, manage chore lists, and move money between saving, spending, and investing. 

Prepaid cards are helpful for younger children and for kids who may not yet be ready for a debit card and checking account of their own. They offer a way to send money instantly and monitor spending in real-time, and it can be a convenient option for managing allowances. 

These cards generally have monthly fees, which can add up if you have more than one child on the account. Look for cards that offer family packages, and make sure you ask about hidden costs. The Federal Deposit Insurance Corporation (FDIC) community outreach team says parents should ask whether there are fees to add or transfer money, fees for inactivity or low balances, or any fees for overdrafts and insufficient funds.

GoHenry and Greenlight market themselves as debit cards and accompanying apps for kids and teens. Both offer a mobile environment, accessible customer service, security features, and financial education tools. Greenlight's most affordable plan is just under $5 per month per family and allows parents to set up accounts for up to five children. GoHenry is $3.99 per month per card. Both are FDIC insured. 

After a parent deposits money into their account, they can use the app to move money into their child's account and choose where they're allowed to spend it. Alerts come in real-time for purchases made and purchases declined, making it easy for parents to quickly get money to their kids if needed.

What age is best for kids to get a debit or prepaid card?

Many traditional debit cards and checking accounts are more suitable for middle school and high school-aged youth — young people who are more mature and who also may be earning their own money. It also gives them a chance to experience the sting of overdraft fees, which, according to Laura Levine, president and chief executive officer of Jump$tart Coalition, can be a powerful lesson.

"If it's not a chronic problem, it actually is good preparation for a child who's ready to do it because that's what adult life is going to be like," Levine says. "If your child is less experienced and likely to rack up some fees, then a prepaid card really helps to contain that."

A good option for younger or less mature kids who are still learning about money and spending, the cards often come with flexible parental controls and real-time notifications.  

"Parents can load their child's allowance onto the card and use it as an opportunity to teach budgeting skills, for example, showing a child how to track the money they have, how to make it last, and what happens when there is no more money available," Griffin says.

7 popular debit and prepaid cards for kids

Whether you choose to go with a checking account and debit card from a bank or credit union, or a prepaid card, the key is to select the product that best meets your family's needs. You may decide monthly fees are a worthy expense in exchange for added parental controls and no overdraft fees. Or you may feel a checking account with a debit card is best for managing your child's money and getting them acquainted with a financial institution and the real-life consequences of inattentive spending.

Things to remember about cards for kids

When selecting a card, consider your child's money skills and maturity, along with your needs and wants as their parent. "It isn't so much whether it's a debit card or a prepaid card, but what else comes with the program," Levine says. 

Before you open an account, review the fine print. Make sure you understand all of the fees. If going with a bank or credit union, ask if you can opt out of overdraft protection. Transactions may be declined because the account doesn't have enough money, but the alternative is racking up a bunch of overdraft fees if the institution charges them. 

Also ask if the account and cards are insured, either through the FDIC or NCUA. Finally, look for a user-friendly mobile app that makes moving and monitoring money easy for you and your child, and offers protections like turning a card on and off and resetting the PIN.