Credit Cards for Teenagers: Educational Tool or Gateway Drug?

For many families, cash allowances are so passé. Now, it's all about loading up a pre-paid card for your child's wallet, and tracking their purchases online.

VISA has partnered with PAYJr.com to create the PAYJr VISA Buxx card, a reloadable prepaid card designed especially for teens.

"This prepaid card gives teens flexibility and spending independence, in addition to teaching them personal financial management," PAYJr.com says.

How the card works

Teens and parents can load money onto the card electronically, and then the teen can use the card independently. Parents are kept in the loop about their teen’s spending, as the PAYJr system provides SMS text messaging or email notifications to keep parents and teens aware of card activity, including balances and loads to the card.

The PAYJr system also provides a way for parents and teens to track the teen’s earnings, as well as their spending. For example, a parent can load funds onto the teen’s card once a set of chores has been completed. Or parents can set up a regular payment (or "load") to the card for allowances.

The PAYJr VISA card system can tie chores and finances together, and provides extra support to ensure parents and kids are aware of card charges, bill due dates, and more.

Credit education or just keeping us hooked on the credit habit?

The current credit crisis makes it clear that we need a better way to educate people about credit and its true costs. But is doling out more plastic - no matter how parentally monitored - the answer? While the PayJr card isn't technically a credit card (it's pre-paid), it still looks and feels like one. It even lets you design your own card using a favorite photo, making it even more fun to use.

Has anyone tried this system? Do you find it’s a good way to teach your kids how to handle credit responsibly, or is it just getting them hooked at an early age?