Kids aren’t making the grade when it comes to successfully transacting with prepaid cards.
Just take a look at these stats from FamZoo cardholders.
I sampled kids from active families who have:
- used a card for at least 3 months, and
- have made 20 or more purchase attempts in the last 90 days.
A decline percentage of 3% means that for every 100 purchase attempts, the cardholder would likely experience 3 declines. If those 3 declines were incurring average bank overdraft fees, the cardholder would be facing over $75 in penalties. Ouch.
Here’s how the kids break down by purchase decline percentages, which I bucketed into subjective grade levels:
|Decline Percentage||Percentage of kids||Grade|
|5% or less (but over 0%)||12.1%||B. Getting there.|
|25% or less (but over 5%)||32.8%||C. Lots of work to do.|
|50% or less (but over 25%)||16.1%||D. Pretty darn awful.|
|Over 50%||19.7%||F. Yikes!|
That’s a lot of kids bringing home bad money habit report cards.
I’ve written before about the 6 month Zero Decline Challenge as a test for bank account (or credit card) readiness. The good news is 19% of the kids from this sample are at least half way there. But the majority are nowhere close, with 19.7% flat out flunking.
I’ve also suggested assessing a parental overdraft fee as a way to curb declined transactions. It looks like the Bank of Mom/Dad would be clawing back a ton of fees from these kids!
But maybe you’d rather offer the carrot instead of applying the stick. A reward to encourage the good behavior instead of a penalty to curb the bad.
If so, consider paying out a bonus for making the grade each month. Of course, it’s your call as to which grades warrant a bonus and how much, if any.
To help kids make the grade, offer this simple study guide for avoiding declines:
- Check the balance before a purchase. Most cards have handy apps that make checking the balance easy for kids.
- Watch out for recurring bills. That’s where lots of the kids are going astray with declines. They sign up for services like Spotify and forget to leave a buffer on their cards for when the next billing hits.
- Remember the PIN. Not only will the wrong PIN yield a decline, but 3 PIN strikes and you’re out. Help your child pick a memorable but secure PIN.
- Locate the card security code. Typically, it’s on the back next to the signature panel. The code is a security measure intended to reduce fraud when the cardholder is not present for the purchase — like when purchasing online.
- Match the billing address. Make sure your kid knows the address on file for the card. That’s the address your kid will need to supply for the billing address when purchasing online. If the two don’t match, the transaction will be declined.
After mastering those points, your child will be on the road to an easy A+.
Whether you opt for the carrot, the stick, or just a discussion when it comes to declines, make sure to pay attention. Ignoring bad habits won’t improve them. Turn on card activity alerts to detect declines right away, and coach your kids in real time.
Raising your kid’s money habit grades early will pay big dividends in the future.
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