Family: Managing your money

by FCAC

Cash Cards for Kids: Pre-paid, or Debit?

Spring is here at last, and Canadians from coast to coast are shaking off those winter blues and thinking thoughts of summer.

For many, this means vacations for the whole family. For some, it also means letting the children escape from the city for a few memorable weeks at summer camp.

If you are among these, you may already be thinking about what your child will need for camp. You may wonder what you should do if your child needs to bring money to camp, in case he or she needs to replace athletic equipment, buy souvenirs and pay other necessities not covered by camp fees. What are the inexpensive ways for children to carry money safely while travelling or on vacation?

Pre-paid cards vs debit cards
Each of these options has its advantages and disadvantages. The option you choose should best meet the needs of your child.

Pre-paid cards, offered under the Visa and MasterCard brand names, are sometimes described as an “electronic wallet”. The card works very much like a credit card or a debit card, except that your spending limits are set by the amount of money you load onto the card beforehand.

Like debit cards, pre-paid cards are practical. To determine which of these options is the least expensive, you should first estimate how frequently your child will use the card. Although there are user fees attached to pre-paid cards, debit cards also have fees, depending on the type of bank account you have.

Add it up

Type of fees

Pre-paid card

Debit card

Sign-up fees/account opening

$1.75 to $39.95

$0

“Re-loading” fees

$0 to $4.95

$0

Monthly maintenance fee/monthly fees

$0 to $15.00

$0 to $30.00

Direct payment fees 

$0 to $0.50

$0 to $0.65

Withdrawal fee

$0 to $6.15

$0 to $6.15

 

Advantages and disadvantages of pre-paid and debit cards
Pre-paid cards

In some cases, the child must be 16 years of age or older to use these cards. However, certain cards allow teens between the ages of 13 and 15 to get a card, if a parent or guardian buys the card and takes financial responsibility for it.

Visa and MasterCard branded pre-paid cards offer protection against fraudulent purchases.
If a pre-paid card is lost or stolen you may not be liable for unauthorized purchases.

However, it can be costly to replace a pre-paid card, up to $25!

With most cards, you can check how much your child spent – as well as how much money there is still on the card – free of charge by going to the card issuer’s website.

Some pre-paid cards are issued with an expiry date. If your child returns home from camp with money still on the card, you will have to keep careful track of the expiry date of the pre-paid card. Some companies won’t give you back the money remaining on a card after it expires, or they may charge you a fee to return the money you didn’t spend.

Accounts and debit cards
With a bank account and a debit card, it usually doesn’t cost you anything to put money into the account that your child can then spend with his or her debit card.

This option lets you keep an eye on transactions your child makes, either by going to the financial institution’s website or reading the account statement you receive in the mail.

A debit card offers your child a chance to learn some lessons about basic banking.

Some bank accounts limit the number of transactions per month. If your child makes more that the allowed limit, you will have to pay extra fees.

Shop around
You can get a pre-paid card in a lot of places. Since different cards have different features and fees, it is wise to shop around, to find the best card for your needs. Make sure you check all of the fees by reading the terms and conditions attached to your card and find out how much it will actually cost you to use the card.

If you opt for a debit card, make sure you know how many transactions the bank account allows per month so as not to exceed the limit and to avoid extra fees. Ask the bank how much you would have to pay if your child exceeds the transaction limit.

Learn more
Find out more about the costs and benefits of pre-paid and debit cards by checking out the booklet Pre-paid Cards, available from the Financial Consumer Agency of Canada (FCAC). This free publication includes a handy list of pre-paid cards, with information on the services and fees associated with each card. The FCAC also provides information on bank accounts and helps you compare various bank products.

To learn more about this publication, visit the FCAC website at www.fcac.gc.ca or call us toll free at 1-866-461-3222. The FCAC is a federal organization that provides consumers with information about financial products and services.

CNM