Teach your kids how money works at their own pace.
An important part of teaching money management from an early age is to show the connection between bank accounts, cards and cash. To this end many children's bank accounts will come with free debit cards for kids that can help make the link clear. Once they have a debit card, they can start seeing what it's all about, by withdrawing money in cash, spending it, and seeing how it's taken from their account balance.
If you're looking to take the next step and give your child a bit more control over their own funds, debit cards can be a sensible choice to let your child make more of their own spending decisions in line with the limits you set, and whatever you're comfortable letting them spend.
An average of 350.6 million debit card transactions took place every month in 2015. Using cards is an integral part of money management today, and kid's debit cards are a safe way to start teaching the necessary skills. Not all kid's cards are the same, however, and it's important to compare the differences before signing up.
Compare kid's debit cards in the table below
How do debit cards for kids work?
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, or you can load a prepaid amount onto the card to make sure the spending stays under control.
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.
It may be worth comparing ATM networks when selecting a card, in order to avoid ATM transaction fees.
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What are the types of debit cards available for kids?
There are two basic types of debit cards available: directly linked or prepaid.
Prepaid debit cards
Loading your child's allowance directly onto a prepaid debit card can encourage saving over time, and introduce the concept of restrained spending. Top it up with only the amount you're comfortable with, and give your child the right amount of control. Prepaid card features to look for include:
- payWave or Tap & Go facilities for contactless purchasing
- Free card registration to track spending and to assure Zero Liability for fraudulent purchasing
Directly linked debit cards
These are linked to the balance in an account, and might be the right choice for children that are old or capable enough to take on both an account and a linked card. When you get a directly linked debit card it will be either Mastercard, Visa or the bank's own brand. The store brand debit cards use EFTPOS facilities and allow ATM withdrawals and in-store card purchases, while Mastercard and Visa will typically offer these functions as well as online purchases. Whether a debit card is Visa or Mastercard depends on the bank's affiliation, but both are similar in use and flexibility.
Additional features of linked cards 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
Considerations before giving your child a debit card
- Fees. The costs can vary between cards and banks. Most major banks offer fee-free services for kid's cards, and it's likely that the most common fees you'll encounter are from using other-brand ATMs. Look for banks with a large ATM network in your area to get more freedom from fees.
- Spending limits and overdraft. The parent or guardian gets to choose the account's spending limits and overdraft facilities. Look for cards that let you cap daily spending, allow or disallow overdraft as desired and otherwise make sure the card is used sensibly. 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. Bank branded debit cards cannot be used for online purchases, while Mastercard or Visa debit cards can. Consider whether being able to buy online is a benefit or a downside, and consider choosing accordingly.
Should I get my child a debit card?
Why it's a good idea
- Flexibility. You get the final say on whether or not your child is ready for a card. You can open a kid's savings account for the competitive rates, and then can simply hold on to the linked card until your child is ready for it.
- Control. Keep track of your child's spending online and cap the daily limit as you see fit.
- Security. Most banks will let you get refunds for fraudulent purchases made on the card, such as if it gets stolen and used without permission.
- Safety. It can be safer to carry birthday money around on plastic instead of in cash.
Why it may not be a good idea
- They're not ready. A debit card is another step towards full account control and it's important to make sure your child is ready for this responsibility. If you're not sure they're ready consider looking specially for prepaid cards, or those which let you retain effective control of spending limits.
What should you avoid when selecting a debit card for your child?
There's no golden age where a child will suddenly acquire money management skills and it's a good idea to avoid committing to a card too early. Children's savings accounts can be opened before their first birthday, so you can start saving with one of these and then simply wait until the time is right to get a kid's debit card.
To prepare for this, many banks have extensive guides on their websites. For advice from outside the industry, however, you might want to look at independent money blogs and vlogs.