Do you often find yourself standing and wondering whether to give your kid a debit or a prepaid card? Do you have trouble telling the difference between the two?
You can avoid this confusion. And the answer lies between what works for your family and what works for your kid.
As a teenager’s parent, you want to ensure they’re responsible for their finances. In this article, you will learn more about the difference between prepaid card vs debit card. That way, we can help you choose the best card for your teen.
Take a look below to find out!
What Is a Prepaid Card?
A prepaid card is a type of payment card you can use to make purchases without incurring debt. The cardholder can load money onto the card in advance, which can then be used to pay for goods and services.
Unlike traditional credit cards, prepaid cards do not have spending limits or interest fees. But there are fees associated with it. And this might include monthly maintenance, reloading, and transaction fees.
Many prepaid cards also come with features such as mobile apps and online account management. You can go here and see other features you can enjoy with prepaid cards.
What Is a Debit Card?
A debit card is a card that allows you to spend money that you have already deposited in a bank account. A person’s bank account is instantly accessible when using a debit card.
Debit cards are convenient and can be used anywhere credit cards are accepted. You can also use it to withdraw cash from ATMs.
The Pros and Cons of Prepaid and Debit Cards
Prepaid cards and debit cards each have their advantages. But there are critical differences before deciding which is best for your teen.
With a debit card, your teen can access the money in your bank account and spend up to the available balance. With a prepaid card, your teen can only spend the money you have loaded onto the card in advance. This is great if you want to give your teen money while still being able to track and limit their expenditures.
Debit cards are linked to a bank account, so there is the potential to overdraw. This can be damaging to credit scores. However, debit cards offer more flexibility in terms of spending and can be used to build credit.
What Is the Best for Your Teen?
It depends on your situation. Consider your kids spending habits and your financial goals for them before deciding.
If you choose a prepaid card, check whether the card is FDIC insured. This means that the money on the card is protected if the card issuer goes out of business. If you’re unsure which option is best, talk to your bank or financial advisor for more guidance.
Prepaid Card vs Debit Card: Your Best Option
Various cards are available, so it can be challenging to know which is suitable for your teen. Make sure you compare prepaid card vs debit card and their benefits. That way, you’ll be able to make the best choice.
For more financial and lifestyle topics, check out the other articles on our blog!
