Students are prime targets for credit card companies. Teaching kids how to use credit cards wisely before they become eligible to apply for credit on their own can be a wise move. Reloadable credit cards can help do that by enforcing one very important rule:
No money? No spending.
True credit cards that provide a credit limit up to which you can spend money without actually having the money of your own, make spending all too easy for many consumers. The Federal Reserve Statistical Release on Consumer Credit dated November 6, 2009, reports that outstanding balances on revolving credit at the end of September totaled $886.6 billion. BILLION. That is really rather scary.
In April 2009, Sallie Mae released their semi-annual report entitled . The study showed:
“Undergraduates are carrying record-high credit card balances. The average (mean) balance grew to $3,173, the highest in the years the study has been conducted. Median debt grew from 2004’s $946 to $1,645. Twenty-one percent of undergraduates had balances of between $3,000 and $7,000, also up from the last study.”
Our kids are becoming burdened with debt before they can complete college and obtain a decent paying job. Adults know how difficult it is to venture out on their own after college, but being saddled with debt at the same time is a double whammy.
One solution is to teach them that plastic forms of money are money, too – that plastic is not an endless supply of funds.
Reloadable credit cards teach kids how to use plastic for transactions and money management without extending credit. Teens can use these prepaid credit cards for buying food, paying their bills, buying gas, and paying for living expenses while in school.
If the cards are loaded through direct deposit or are used for a minimum number of transactions per month, the activation fee and monthly maintenance fees may be waived which are much better than putting students in a position of racking up absurd amounts of interest and over limit charges while just getting their start in the world.
Students who are working part time in college can load their own paychecks on to their prepaid card if they have direct deposit available to them. The convenience of direct deposit is that one’s paycheck is immediately available for use without having to make a trip to the bank to cash or deposit the check into a checking account.
Reloadable credit cards are also a great way for parents to supply their teens with additional funds if they run out. Parents can load the cards from their own computer or home town for students going to school away from home. This way, in an emergency, you can quickly supply additional money without paying Western Union fees or overnight mail fees.
Compare fees on reloadable credit card offers and not only will you find they are much safer for kids to use than regular credit cards but they are also much cheaper. The savings in interest alone is incredibly valuable.
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