Create financially savvy adults by teaching your kids smart money management.
Having a debit card can instil a sense of responsibility in kids that will set the foundation for sound financial management later in life. In 2001, the Australian Payments Clearing Association (APCA) recorded 53.2 million debit card transactions per month. That same year at an OECD (Organisation for Economic Co-operation and Development) conference titled “The Future of Money”, participants came to the consensus, “Money’s destiny is to become digital”.
Fast forward to 2015, and Australians recorded 350.6 million debit card transactions on average per month.
In keeping with projections, nowadays it’s harder going to find a service provider or store that doesn’t accept credit and/or debit card payments. So why not make parental choices that are aligned with the pace of the digital economy? Is it time to consider a debit card for your kid?
Compare kid's debit cards in the table below
What is a debit card for kids?
Kids debit cards are offered by most banks as an optional extra when establishing a kids, youth or teen bank account.
As with debit cards for adults, these cards can be linked directly to a transaction account and used in place of cash. Alternatively, you can budget with a prepaid debit card, limiting usage to an amount you have deposited onto the card.
In each case, it’s important to do a little investigating before you sign up to avoid extra fees and hassle.
How do debit cards for kids work?
Direct-linked debit cards can be set up for free, with most big banks offering no-monthly-fee options for students and kids under the age of 18 (or in some cases 21). In the case of a prepaid debit card, there might be a one-off purchase or set-up fee.
Additionally, most banks will offer no withdrawal fees when using ATMs from their own bank branch, although normal fees may apply if you use another banking institution or non-bank ATM.
What are the types of debit cards available for kids?
There are two basic types of debit cards available: directly linked or prepaid.
Directly linked debit cards
In the case of a directly linked card, you will receive either a debit MasterCard, a debit Visa or a bank-branded debit card. Whether you receive a Visa or a MasterCard will depend on your banking institution’s affiliations, but both are flexible and can be used in the same way that a credit card can. A bank-branded debit card uses EFTPOS facilities, which you can use by selecting SAV or CHQ when making a purchase, and which cannot be used for online purchasing.
Directly linked debit cards withdraw funds from the balance available in your child’s account. Additional features may include:
- Free online and mobile banking
- Manual usage limits (a predetermined cap on the amount of funds that can be withdrawn each day)
- 24/7 banking support
- payWave or Tap & Go facilities for contactless purchasing
Prepaid debit cards
These cards offer tighter security and less worry for parents. Features may include:
- payWave or Tap & Go facilities for contactless purchasing
- Free card registration to track spending and to assure Zero Liability for fraudulent purchasing
Considerations before giving your child a debit card
- Fees. As mentioned above, fees can differ depending on the type of card you choose and the banking institution. Whilst most major banks offer fee-free services, the most common kind of fee you might incur will be from using another bank’s ATM to withdraw cash.
- Overdraft. The account conditions are at the disposal of the parent or guardian of the child; this includes capping daily spending and allowing overdraft or not. Note that different banks have different policies and fees associated with overdraft services.
- PIN or sign? PINwise saw Australian businesses adopt a PIN-only policy in 2014. Card or terminal errors might call for a signature in combination with a PIN on some occasions so it remains important to have your child sign the back of the card.
- Shopping online. A debit MasterCard or Visa can be used for online purchases. A bank-branded debit card cannot.
Is a debit card for your child actually a good idea?
Why it's a good idea
- Control. You make the call on whether or not your child (under 18 years of age) receives a debit card along with their bank account.
- Security. Keep track of spending with an online transaction history and cap the daily expenditure as you see fit.
- Support. Most banks will have a “no liability” policy for fraudulent purchases.
- Safety. Birthday money need not be carried around in wads, but on plastic.
Why it may not be a good idea
- Financial independence. It’s important that your child first understands the responsibility of money management before they take their finances digital.
What should you avoid when selecting a debit card for your child?
Kids will be kids, so it’s important you avoid misuse and instil a sense of responsibility in your child, giving them all the necessary information to use and value their first debit card.
Most banks have extensive FAQs and/or Q&As published online to which you can refer. Alternatively, there are many money blogs and vlogs that cover this topic in detail.
Did you have these questions about debit cards?
When should I give my child a debit card?
This is completely up to you and your individual experience. Money management skills typically develop between the ages of three and six years old in most cases, so it’s important to have financial discussions with your kids from a young age. Let them learn the value of money and come to you with a request.
Will I receive the transaction history each month?
You can now track transactions online for directly linked debit cards. Many prepaid cards from major outlets (including MasterCard and Visa) will now also allow you to register your card online for tracking purposes. Most banks will default to digital transcripts, however you should contact your own banking institution to enquire about a hard copy transcript if required.
Can I reverse a transaction?
Transactions can be disputed if fraudulent, with most banks offering Zero Liability for customers. They can also be disputed if a service provider does not provide the goods or services as stipulated. In both cases you should contact your bank to start the review process.