Getting a Student a Prepaid Debit Card

Posted by: Meredith K. | May 28,2008


Why even bother fiddling around with credit?  We all know by now that students are terrible debt managers.  So why even get them a credit card?  Prepaid debt cards are much safer and still provide some of the benefits of spending on credit.  

Here’s why getting a student a credit card is a good idea:

1. It introduces the student to the world of credit cards and bill payment.  
2. It establishes a credit history, which will help the student get loans later in life (if he or she responsibly pays off the card). 

A prepaid debit card can achieve the same thing, without the danger of driving a student too deep in debt.  If a student racks up a quick $1000 on a credit card bill, you can be pretty certain that the issuer will raise the student’s credit limit.  The issuer wants the student to spend, spend, spend.  

A prepaid debit card, on the other hand, has a cap.  You deposit a set number of funds on the card.  So if there’s $500 on the card, the student will have to effectively budget to make sure that she does not spend too big a chunk of that deposit at any one time.  If the student needs more money, she’ll have to ask, rather than just spend on credit with no sense of accountability.  

A prepaid debit card really makes the most sense for younger borrowers.  They’ll be more effective debt managers, while still building up a credit history.  Their credit rating is bound to improve because they’ll never be mired in too much debt.  Instead, debt will stay at a reasonable level, ensuring that a credit rating will never tank.  

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