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Why Prepaid Cards Are One of the Best Choices for College Students

· students,DEBT,Prepaid Card

The popularity of prepaid cards continues to grow each year, and according to a 2014 survey conducted by Mercator Advisory Group, more than 50 percent of Americans had purchased a prepaid card in the preceding year. It's likely that at least some of these cards purchases were made by parents on behalf of their children, particularly high school and college students.

Parents may gravitate towards prepaid cards for their college students for a variety of reasons. One of the biggest draws is that they can be used to teach financial responsibility. Credit cards and bank-issued debit cards present a host of challenges that can get young adults into trouble well before they're on their own.


Parents sending their kids off to college want to ensure that they have enough money to take care of daily expenses. Also, parents want an easy way to send their college students money. Prepaid cards allow them to accomplish this without using inconvenient methods like mailing checks or costly wire transfers. Considering the pitfalls of bank-issued debit cards and credit cards, it's easy to see why prepaid debit cards are a logical choice for college students.

Prepaid Debit Cards Encourage Financial Responsibility

Debit cards tied to a bank account can be problematic for young adults. These cards are connected to a checking account balance, so the opportunity to overdraw the account is ever-present. Although there are policies that allow account holders to opt out of overdraft protection, this won't prevent certain charges from being made anyway, resulting in costly overdraft fees. Giving a prepaid card to your college student will help them understand their spending habits and reinforce the notion that once the money is gone, no more purchases can be made.

Budgeting is an extremely important part of money management, and the sooner a person can effectively budget, the better. Prepaid debit cards help students make the connection between swiping their card and real money. Credit cards fail to do this because the financial consequence isn’t immediately felt. By spending only the amount loaded onto the card, students with prepaid cards are more likely to be careful when making purchasing decisions.

For parents, giving college-age children prepaid debit cards can provide peace of mind. Carrying a prepaid card is safer than carrying cash, and in the event a card is stolen, it can be easily cancelled and replaced. This eliminates the problem of losing cash and never being able to recover it. In addition, most prepaid cards branded with well-known credit card company logos come with the same level of fraud protection as their bank issued counterparts.

Parents can reload cards from nearly anywhere in the world, making prepaid cards very convenient for person-to-person transactions. In most cases, parents can also monitor their student’s transactions online or via mobile app. This gives them the chance to help their child understand the significance of each transaction as well as how to make better financial choices.

Avoid Getting into Debt

It’s no secret that people tend to be more careful when using their own money, which is why credit cards can be so problematic. Credit cards fail to teach responsibility because the money is essentially loaned to the cardholder to be repaid later with interest. For young adults who have yet to cultivate solid money management skills, credit cards may create a pattern of overspending without awareness of the consequences. Additionally, if the card’s balance isn't paid within 30 days, then interest charges accrue and the cardholder is saddled with recurring monthly payments.

For college students, using credit cards can mean getting into debt long before they graduate and start their careers. Parents may also be implicated if the student's card is tied to their account and they may end up paying in order to protect their credit rating. Using prepaid cards won’t hurt your credit, although they also don’t help build credit since no money is being loaned.


On the plus side, however, prepaid debit cards do not require a credit check and any activity on the card is not reported to any of the three main credit reporting bureaus. Prepaid cards feature major credit card branding, can be used anywhere credit cards are accepted, and don’t come with a monthly payment. Most prepaid cards are able to be used for direct deposit as well, which will save money and time.

As with any financial product, it’s important to understand the associated fees. There are a wide range of prepaid debit card options available to consumers, so performing research beforehand is encouraged. Parents may even want to have their students join in when searching for an appropriate card, which will also help promote financial responsibility.

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