Young adults can easily learn the ropes to gain financial freedom with the use of prepaid cards.However, both the users as well as their families will have to be aware of its limitations and the costs that are associated with them, experts report.
Most of the major banks offer these prepaid cards, where a set amount could be loaded well in advance.Most of these purchases could be made in the same manner in which the ordinary credit card is used and it could also be used to withdraw funds from the ATM’s.But the only limitation is that once the amount is over, it is over unless it’s topped up again.
Most of these prepaid cards have been targeted at these young adults.For example, MuchMusic has a prepaid MasterCard on offer and has a huge list of FAQ’s for parents pasted on their website.
The executive director of Credit Canada also provides financial counseling to young adults, which is a non-profit organization.She states that most young adults are being unnecessarily burdened by thousands of dollars of credit card debt and not just the student loans.
College & university students racking up huge unsecured debts seem to be a cause for concern according to Laurie Campbell. Hence, debit cards will help keeping them in check as they can use only what is available on the card and nothing over that.This might help these young adults understand things about the checks and balances of the credit system as a whole.
Credit Counseling Society, CEO, Scott Hannah states that while there are certain merits associated with prepaid cards when it comes of security and convenience, but is not a solution to financial problems that could arise if these youngsters are not financially savvy.
Debit cards do not necessarily promote better spending habits in youngsters as parents keep loading these debit cards for their children and continue to do so, he stated.There are also other costs that are associated with prepaid cards and many cards will charge a fee every time a card is reloaded.These charges will depend on how often the card is reloaded in a year.Although it is not insurmountable, these costs certainly add up.There are also limitations on these cards while using it for making online purchases and they don’t help in establishing the credit history.