by Susan Sharkey, HSFPP Senior Director
September 7, 2016
I frequently work with educators, which provides me with valuable, second-hand intel about what students want and need to know about personal finance, but I rarely get to hear directly from students anymore. So it was a pleasure to facilitate a recent financial education workshop for a group of teens.
As many teachers have experienced, a lesson can get waylaid by questions and comments from students. We had such a moment during the workshop while talking about borrowing habits. It became apparent that the students misunderstood how debit cards work; several students had heard that using a debit card helped one’s credit rating. As I probed further, I was silently astonished about how casually the young teens (middle grades) handled their debit cards, which could be putting their account funds at risk.
I just had to pause during our time together for an impromptu conversation about the responsibilities of using a debit card and the undesirable consequences of misusing or losing the card.
1. A debit card is NOT a credit card.
When asked if they had used a family credit card in the past, several attendees shared that they had their own credit cards. Knowing that this couldn’t be true (those in attendance were ages 11-13), I asked them to look more closely at their cards. Aha — we found that they all had been referring to a debit card or a prepaid debit card.
This is when I explained that a person typically needs to be of legal age and have income to be eligible for a credit card account. The discussion included a summary of what credit card data is used by others to determine how well an individual manages credit card use and how a person’s credit card history impacts the financial aspects of his or her life.
The workshop participants mistakenly surmised that they were on the path to creditworthiness by using their debit cards often and without ever having a payment declined. After explaining that a debit card has nothing to do with borrowing, they seemed to grasp the need to establish a credit rating by other means when they are legally able to enter into credit agreements.
2. Your debit card must be guarded, the same as cash.
It was interesting to watch the reactions of some workshop participants when they realized that anyone with access to the debit card can remove money from the account, much like anyone walking through a home can take coins out of a money jar on the kitchen counter. It seemed imperative for another workshop deviation to discuss security measures that deter unauthorized access to debit card account funds.
Key takeaways for the day included strategies to safeguard one’s card via protective handling, secrecy when using personal identification numbers (PINs) and swift reporting if a card is lost or stolen. When comparing ways to pay for online purchases, some workshop attendees had an aha moment when they realized that using a debit card can put them in a vulnerable situation because the vendor receives account information that enables access to the cardholder’s account funds.
As we explored what-if scenarios, we agreed on the need to regularly monitor account transactions and promptly address any unauthorized withdrawals (within hours or days if possible). The teens also proposed keeping the account to a nominal, just-what-is-needed balance rather than stashing all savings in the account, where it is susceptible to unapproved withdrawals.
3. Be disciplined when using your debit card.
The workshop participants reflected that they were more thoughtful when making cash purchases than when using a debit card. They speculated that this is because cash in hand is a finite amount, while a debit card seems to provide access to unrestricted funds, leading to more frequent impromptu purchases.
This triggered the recommendation for a way to visually track debit card use and monitor the account balance. As we shared various self-imposed rules for using cash, I prompted the teens to establish their own rules for using their debit cards in ways that are intentional and aligned with their desired money habits and goals.
The questions and comments asked by the students during our morning together reinforced for me the relevance of exploring how debit cards work and the importance of safeguard measures, especially at a stage when youth are taking on responsibility for independent spending decisions.
- Protect your debit card and account. Watch for unauthorized transactions, and act swiftly to correct errors.
- Establish usage terms for your own and/or joint debit cards. Discern when to use a debit card, pay with cash or use a credit card. Routinely monitor and reconcile your accounts.
- Inform others. Teachers tell teens. Have a conversation at home. Let peers know
- Learn the difference between various payment methods.
Key Takeaway: When handing over a debit card to a young person, have a conversation about the responsibilities of using the card and the significance of safeguard measures to protect account funds.