Vacation Credit Cards for Children
Giving your kids a prepaid credit card while on vacation can be a time saver for many families, but it comes with challenges, too. Which are the best credit cards for this purpose and what are the restrictions?
For many parents, the idea of a "vacation credit card" for their children is appealing. Older children are afforded some independence to shop while on a family vacation, which makes both kids and parents happy. A vacation credit card for children is essentially a prepaid credit card; it works much like a gift card and can be used anywhere Visa or MasterCard is accepted. These cards offer many conveniences, but they also have some disadvantages.
Prepaid Credit Card Basics
Parents who want to provide their children with prepaid credit cards for vacation will find the process easy. Most credit card issuers offer a prepaid product, and parents must simply apply for that prepaid card in their child's name. Once money is deposited into the account, the card becomes active. Children can then use their cards anywhere Visa or MasterCard is accepted. Each transaction will be subtracted from the card's balance, and when the balance becomes low, parents can reload the card using funds from a credit card or checking account. They can also choose to let the card become inactive once funds are depleted.
Parents who choose prepaid credit cards for their kids appreciate the convenience of older children being able to purchase food and items without having to continually ask for cash. The cards are safer than cash, because they work like standard credit cards: If the card gets lost or stolen, a quick phone call to the credit card company will freeze the account so it can no longer be accessed. At that time, you can transfer any remaining funds to a new card. Unlike standard credit cards, prepaid cards do not incur high interest rates or late fees.
Many parents like this product's convenience so much that they continue to let their children use prepaid credit cards even after returning from vacation.
There are disadvantages to prepaid vacation credit cards, too--primarily the fees. Many credit card issuers charge an activation fee for these cards, as well as an additional fee each time more money is loaded onto the card. If the child uses the card to get cash from an ATM, that will also incur a fee.
Another drawback is the wait time associated with transferring money from your checking account to the card. This can cause problems if you make the transaction while you're on vacation. Money transferred from a bank account is usually not available for use for a few days, by which time you might be back from your vacation.
Set up a system to track your child's purchases. That way you can keep tabs on her spending and educate her about the use of this card, helping to overcome its "free money" image. Most credit card websites allow you to track prepaid credit card purchases online. Consider giving your child a transaction register, similar to the forms many people use to manage checking accounts, so she can do the math and track the account's balance herself. Transaction registers are available at most banks.
It is important to teach your child the differences between traditional credit cards and prepaid credit cards used during vacation. Misunderstandings about how easy these cards are to use can lead to potentially disastrous problems when your child is old enough to get a real credit card and begin to build a credit history of his own.
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