Teaching Your Teen Financial Responsibility With Plastic





Swiping with a piece of plastic has become the most common way to pay for nearly everything consumers buy these days. In these modern times, writing a check at a cashier’s register is nearly become obsolete and the majority of transactions are done through a debit card, a credit card, or a reloadable prepaid card.

When it’s time for your teen to start spending their own money, it’s important to explain to them the difference between the various types of plastic that are used for transactions. Here are a few main points to teach your teenagers about plastic tender:


Debit Cards

Debit cards are linked to a checking account and behave exactly like a check. When you swipe the debit card, the charge is subtracted from your checking account and sent to the vendor. Debit cards transactions may be rejected if there’s not enough money in your account, so it’s important to keep track of your balance before swiping your card. Depending on the bank account rules, your purchase may be paid even if you don’t have enough funds, but you may be charged a costly overdraft fee.

Reloadable Prepaid Card

A prepaid card is a great starter card for a teenager because it allows the parent to set spending limits by adding a set amount of money to the card. A parent can easily put a monthly allowance onto the prepaid card, giving the child the opportunity to get used to using plastic tender without putting themselves into debt. Many banks and credit an online card services like this website offer this type of card for students because it is a good way to develop positive spending habits, while allowing for flexible spending at a variety of vendors. There is no fear of affecting the teen’s credit or running up overdraft fees, because all money on the card is pre-deposited from another account.

Credit Cards

When you use credit cards to pay for purchases, you are buying something today with a promise that you will pay the creditor back for it later. Using a credit card is basically taking out a loan to pay for the item. If you do not pay your entire balance by the statement date, the credit card company will charge you interest on the total amount you owe them. Since credit cards charge high interest, the best way to manage a credit card account well is to pay off the entire balance every month. It’s a good idea to set aside a certain minimum balance in your checking account that is equal to your total credit line on your credit cards. This way, no matter how much you charge on your card during the month, there will always be enough to pay it off all the way at the end of the billing cycle. Paying only the minimum payment due will mean that over time you will pay much more than the original value of your purchases.
Keep in mind that if your teen doesn’t understand the difference between debit cards, credit cards and prepaid cards, it will be very difficult for them to learn the proper way to use their cards so they can be financially responsible. However, if you educate them about the way to handle the various types of plastic payments, your teen will soon be managing their money like a pro.


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