Bank Cards for Children

Is there a right age at which children are ready for their first bank card? At least there is an age from which children have limited legal capacity – namely seven years of age. This is stated in § 106 of the German Civil Code. From this age, children can open a bank account and thus also apply for a corresponding bank card.

Of course, this is only possible with the consent of the parents or legal guardians. They are responsible for the account.

How exactly does a bank card for children work?

There are different bank card models that banks and savings banks offer their young customers – of course always in connection with a bank account that is linked to the bank card:

  • A simple bank card: This variant is a card with which children can, for example, deposit their pocket money into their account or also withdraw it. This, in turn, can only be done directly at the bank counter or ATM. However, children cannot pay in shops with this simple bank card.
  • The giro card/debit card: In addition to making deposits and withdrawals via ATMs or the bank counter, children can also use this card to pay in shops – sometimes contactless and always with a PIN. It is also possible to pay online with a giro card.
  • The prepaid card: In principle, this option is comparable to a rechargeable SIM card for smartphones. A corresponding credit is loaded onto the card. You can then use the card itself to withdraw money or pay in shops in the same way as with a giro card. The crucial difference is that once the credit on the prepaid card has been used up, (out)payments are no longer possible. There is no credit limit.

In addition to these functions, some account cards for children also include minor control mechanisms. These may include, for example, that:

  • only certain amounts of money can be withdrawn.
  • only special and age-appropriate items can be paid for with the card in shops.
  • contactless payment is not activated.
  • the child’s bank card bears an invisible marking. Merchants or their terminals thus immediately recognise that this is a child’s card.

All this provides initial and good protection.

What are the advantages of bank cards for children?

A big plus that bank cards for children offer is certainly that with the card, the little ones practically have a tangible link between virtual and physical money in their hands. After their first encounters with money as something that can literally be grasped, counted, thrown into the piggy bank or even placed on the well-tried shop counter, handling a bank card is, so to speak, the next lesson in financial education and financial knowledge. How does a bank card actually work?  What is cashless payment? Where does the money on the card come from? What happens if the bank card is “empty”, lost or stolen?

In addition, bank cards for children also offer the possibility for children to deposit their pocket money or gifts for birthdays and good report cards directly into their savings account. In this respect, saving money is also a useful side effect of bank cards.

After all, when using their bank cards, children gradually learn to handle their money on their own responsibility and thus take more and more personal responsibility for their finances. According to experts, this also includes making financial mistakes: As long as they are made in the company of their parents, mum and dad can take countermeasures, explain correlations and work through bad or impulsive purchases.

Last but not least, bank cards are also useful when children go on a school trip or go on a leisure trip without parents. While cash can be lost or stolen, a bank card is at least protected by a PIN and also insured.

 What should I look for in a bank card for children?

Similar to bank or credit cards for adults, you should also look at different criteria for bank cards for children to decide which offer is the best:

  • Costs: Are fees charged for the card and the associated account (i.e. account management and possibly also transfers)?
  • Additional prepaid card: Does the bank offer a prepaid credit card in addition to a children’s/youth account and corresponding current card? If so, is this available free of charge?
  • ATMs: At how many ATMs is the withdrawal of money free of charge (cash groups of the banks/savings bank association)?
  • Flexibility of functions: To what extent or how flexibly and easily can you limit/expand the functions of your child’s bank card? Especially if children have a bank card that also allows online payments, in-app purchases or payments for streaming offers – i.e. via classic online banking or also in connection with an app – you should look very carefully and, if necessary, not allow or deactivate these bank card functions for the time being.
  • No overdraft possible: Does the bank card really not allow an overdraft of the account or the credit balance? Is the bank card really linked to a 100 percent credit account? Although banks in Germany are only allowed to grant children and young people an overdraft facility if their parents or guardians explicitly agree to this, it is always worth taking a detailed look at the small print of the terms and conditions.
  • Overview: Is it possible for you and your children to have an overview at all times of all transactions made on the child’s bank card? Are there (digital) account statements and/or a link between the account and the card with an app through which all account transactions can be called up?

What does science say?

On the subject of the “right age for bank cards and bank accounts for children”, science and the banking industry recommend a minimum age of twelve.

Both the German Credit Association and the German Youth Institute are of the opinion that only at this age do children understand at least the basics of cashless payment transactions. And in connection with this, they are also able to understand the risks that arise from paying with a plastic card. For as long as children can neither see nor touch the money they spend in coins and notes, it does not appear to be real money.

What do other countries do (differently)?

The Swiss, according to the results of the Swiss Pocket Money Study commissioned by Credit Suisse, do not trust their children to use their own bank card responsibly until they are 16 years old.

In the UK, according to a joint study on “Children and Finance” by the Moscow-based analysis centre NAFI and the global network Child & Youth Finance International (CYFI), almost one in five children between the ages of 8 and 14 have a bank card linked to their parents’ account.

Financial institutions in the US and the UK that focus exclusively on digital banking solutions are targeting the tech- and app-savvy Millenials or Generation Z (i.e. everyone born from the turn of the millennium onwards) with their app-based debit cards.

With some of these fintechs, there is not even a minimum age for bank cards. It is hardly surprising that even the youngest are to be introduced to cashless payment transactions. After all, the US Generation Z alone has a purchasing power of 150 billion US dollars. And early practice is essential for those who will later become consumer-friendly customers with their own account and credit card.

Conclusion: The age at which a child is ready for its first bank card depends, of course, on many individual factors. How interested is he or she in money? How far can they already abstract? What about their experience with digital/virtual money?

If, for example, you start with a simple bank card with which your child can only deposit money into his or her account and only withdraw small amounts, this is a first and at the same time cautious step towards financial responsibility.  The functions of the bank card should then be able to be expanded step by step, at the pace of the child’s development. It is equally important that you can look at the account together with your child at any time and talk about it.

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