Should You Get Your Child a Debit Card?

I’ve seen lots of ads lately for debit cards for kids. One that caught my eye the other day is issued by Mastercard. It’s called “Greenlight”.

Greenlight’s website boasts, “With the Greenlight debit card and app, kids earn money through chores, set savings goals, spend wisely and invest. Parents set flexible controls and get real-time notifications every time their kids spend money.”

If you are considering getting a debit card for your kids, there is a lot to like about Greenlight.

Parents can block certain spending categories, turn the card on or off remotely with the app, and get notified every time a purchase is made. It utilizes face and fingerprint recognition technology. The Greenlight cards also are FDIC-insured up to $250,000.

Not sure if that last one is a red flag or a perk though. Do I really want my child to have access to a financial tool that requires $250,000 worth of protection?

Let’s move on.

It also has some neat options for chores and allowances. You can create a list of chores in the app. So if you like to pay your kids when they complete their chores, the app will assist with that. If you give your kids an allowance, you can set it up to add it to their debit card balance weekly or monthly. After that, it runs automatically.

Just to be clear, since we’re talking about debit cards and apps, any allowance or payment for chores that the parent gives is done digitally through the app. You’re not actually going to give your child any dollar bills or coins. The money will transfer from your bank account to their debit card balance.

So what if your child acquires actual cash and wants to add it to his Greenlight balance? Presumably, he would have to give you the money. Then you would have to deposit it in your bank account and transfer the money to his debit card.

The Greenlight debit card might help your child learn how to set a savings goal and meet it. After setting a savings goal, it will keep track of the balance until the goal is met.

So with all of these positive aspects of the Greenlight debit card, why am I still very reluctant to get one for my kids?

For one, this feels like a sneaky way for Mastercard to get your kid used to swiping plastic to pay for everything. If you get this card for your child when he turns 12, guess whose mailbox will be flooded with Mastercard credit card offers when he turns 18? And why wouldn’t he want one? After all, he’s been swiping plastic for a third of his life at that point.

While using credit cards is not necessarily a bad thing, they are risky for teenagers who don’t understand how they work. Just Google “teenage credit card debt horror stories” to see some sad situations these teens got themselves in.

Another negative to using the Greenlight debit card, is that you have to pay a monthly fee. There are three different plans, ranging from $4.99/month to $9.98/month.

I would only recommend a debit card for a child if the parent is there every step of the way teaching him how it works. The parent should explain exactly how debit and credit cards work and what a budget is. The parent should only allow more money to be added to the card’s balance if the child has earned it by doing a chore, receiving an allowance, or by meeting a goal at school, like getting good grades.

Take any of those conditions away, and I would advise against giving a child a debit card.

Studies by MIT and Dun & Bradstreet have both shown that people will spend more money on average when using a credit card instead of cash. While a debit card is very different from a credit card, the feeling involved with a purchase is the same- You hand over a small rectangular piece of plastic. In return you get some brand new merchandise.

You don’t hand over any cash. It doesn’t feel like you paid anything for your purchase. It’s just too easy to spend more money than you intended.

If you want your child to learn about money, he doesn’t need a cash-substitute like a debit card. Just let him use the real thing.