(NC)-If you have teenagers, you know that they are constantly being bombarded with new product offers. You may then have noticed a new kind of financial product, called a pre-paid card, being marketed to parents as a safe, convenient way for teens – sometimes as young as 13 years old – to carry money.

A pre-paid card works much like a credit card or a debit card, except that the amount of money you can spend with it is limited to the amount loaded onto the card beforehand.

Pre-paid card issuers often promote this product as a convenient tool to help teens learn how to manage money and become financially responsible. Although this type of card may help do that, the lessons come at a price.

Fees, fees, and more fees

With pre-paid cards, no bill is going to come your way in the mail. Instead, you’ll find that there are several types of fees that will be deducted from your card to pay for various transactions – such as making purchases; reloading money onto the card; and inquiring about your card balance. Some cards also have monthly maintenance fees, and several have time limits on how long you can use them before you have to pay a fee on the remaining balance, or forfeit the card outright.

With pre-paid cards, you are responsible for keeping track of how much of a balance you have left. Usually, you can check your balance on line, at no cost. However, since your balance may only be updated once a day, your record may not accurately reflect how much money you have left on your card.

You should also be aware that, when you load your pre-paid card, it can take up to five working days for the money to be put on it. If you try to buy something that costs more than you have on your card, you may have to pay an insufficient funds fee, or an overdraft fee.

Basic banking for teens

Pre-paid cards can be a very expensive way to spend your own money, since the fees can add up quickly. Depending on your particular situation, the following options may be a better way to teach your teenager how to handle money responsibly:

. a joint account, where you can deposit your child’s allowance;

. a youth or student account for teenagers; or

. a low-cost account.

All of these options offer the use of a debit card, and can be cheaper – and as convenient – as a pre-paid card.

Before you make a final decision, you should learn more about the cost and benefits of pre-paid cards by consulting the Pre-paid Cards booklet, produced by the Financial Consumer Agency of Canada (FCAC).

You can obtain a free copy of this publication – which includes a handy list of pre-paid cards, and information on the services and fees associated with each card – by calling FCAC toll-free at: 1-866-461-3222. Also available from FCAC is The Cost of Banking Guide, which offers detailed information on account packages from more than 100 banks and credit unions across Canada, and Low-Cost Accounts, which lists the financial institutions in Canada that offer low-cost accounts.

For more information, or if you have any questions about other financial products, call FCAC or visit the Agency’s Web site at: www.fcac.gc.ca or at moneytools.ca. FCAC is a federal agency that protects consumers’ rights and provides them with information on financial products and services.

Credit: www.newscanada.com

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