Aside from convenience, the primary purpose of getting a student credit card is to build an early credit history. Nevertheless, instead of building a good credit rating for themselves, many young people found themselves stuck in bad credit due to poor credit card use. If you are thinking about providing your teenager with a credit card but hesitant because of the risk of overspending, why not consider getting a prepaid debit card instead?
The Difference of Credit Cards and Prepaid Cards
Credit cards give its cardholders the freedom to use the card for advanced purchases and pay for them at a later time. Generally, a credit card comes with a grace period where the cardholder must pay off his/her balances to avoid incurring the interest rate fees. A credit cardholder may choose to pay off the full balance or submit only the minimum required payment. However, if a credit cardholder fails to submit any payment on or before the due date, he/she will incur an additional late penalty charge plus interest.
On the other hand, debit cards are prepaid or paid in advance. In order to use a prepaid debit card for payment, the cardholder must have available funds in the account. When the funds have been used, a prepaid cardholder must make a new deposit before he/she can use the card for new transactions.
The limits of prepaid debit cards minimize the risk of teenagers falling in the debt trap. Parents can deposit only a limited amount of cash each month to their teen’s debit account to keep their spending on track. Furthermore, prepaid cards eliminate additional costs on interest rates and penalty fees.
Prepaid Debit Cards that Build Credit
In the past, only credit cards can be used to build credit history. Today, there are issuers of prepaid debit cards that include credit reporting services to the major credit bureaus. Yes, a student can now start building an early credit history using a prepaid debit card. Use the internet to search for debit card issuers with a credit reporting provision.
Send Allowance Conveniently and Cheaply
Prepaid debit cards are also valuable tools for sending and receiving money. Prepaid debit card money transfers are really much cheaper than using traditional Wire Money Transfer Services. Parents can transfer funds to their student’s debit account through online banking without the need to pay transfer service charges.
About the Author
Tara Tiemann is a credit analyst for Go-prepaid.com which has been a resource site for people who want to live debt free. If you are on a budget using prepaid debit cards,prepaid credit cards and prepaid cell phone service can save you big money!