Parents have another way to control their teens' spending.
Today, Discover Financial Services launched a new prepaid debit card aimed at teens. The card, dubbed the Current Card, works like a standard debit card. Parents can deposit funds directly onto the card at no cost from their credit card, bank account or through recurring deposits.
Sure, most teens could open their own checking account or parents could give them a debit card linked to their own checking accounts. But Discover's Mike Boush says the card eliminates the risk of overdraft fees, since teens can't spend more than is loaded into their account. "The spend is limited and the control is established by the parent," he says. Although the cards are aimed at teens, there are no eligibility requirements, so consumers can use the cards for other people, such as elderly parents or babysitters.
One drawback: Unlike credit cards, debit cards don't help users establish a credit history, which may hurt teens once they leave school and need to shop around for a loan.
Nevertheless, prepaid cards can be an alternative for parents who are worried about their teens accumulating thousands of dollars in credit-card debt. The cards generally allow parents to track spending online, block certain merchant categories such as bars and liquor stores and get email or text-message alerts when certain spending limits are reached.
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