With prepaid cards and checking accounts, it’s possible to avoid post-college credit card debt.
Student debt has been big news lately. In Washington, D.C. the big news has been interest rates on student loans. But coming in a close second is the amount of credit card debt many students have when they graduate.
The average graduate from the class of 2013 had $3,000 in credit card debt, according to CNN. Three grand isn’t really that much money. But when you add high interest charges, student loans and low entry-level job wages (or post-college unemployment), that amount of credit card debt can quickly spiral out of control.
So it may be wise for college students to check out alternative ways to manage money – and for parents to send cash quickly in case of an emergency. Here are seven options to consider:
1. Checking account. Many banks – both traditional and online – offer low- or no-fee student checking accounts. These accounts normally come with a standard debit card and ATM access. Students can’t go into debt with this type of account, and parents can easily wire in money or set up a joint checking account that lets them keep tabs on student spending.
2. Prepaid cards. Although many come with higher fees, prepaid cards are becoming a more popular way for parents and students to collaborate on matters of money management. Prepaid cards created specifically for teens and young adults give parents a high level of control over student spending and make it easy for parents to load more money onto the card. And several cards today come with extremely low fees like those listed here .
3. Secured credit cards. If you’d like for your child to begin building a credit history without all the risks of a high-limit credit card, a secured credit card might do the trick. With a secured card, the card holder can only spend up to the amount that has already been deposited on the card. That prevents him or her from incurring additional debt.
4. Charge cards. A few card issuers still offer charge cards, which are similar to credit cards, except the balance must be paid in full each month. These cards come with benefits similar to those of credit cards, and could be a good way for students to access emergency cash – so long as the student or parents can pay off the charge when the bill is due.
5. Checking account alternatives. Checking account alternatives are popping up everywhere these days, especially ones tailored to students. The Capital One 360 account is one excellent option, as it gives students a way to track spending and savings. Plus, this account gives parents access and will even send notifications for account activity.
Another good option is Bluebird, offered by American Express and Walmart. This checking account alternative lets you set up a sub-account for a student. Parents can add money to the account when needed and can set daily spending limits for their children.
6. PayPal debit card. As with the above checking account alternatives, this account gives parents full access and offers automated alerts, spending limits and more. Also, parents can quickly initiate a transfer to the account if a student needs money in an emergency.
7. Gift cards. Gift cards aren’t ideal for everyday spending, since most can’t be reloaded and can only be used at certain locations. But gift cards can make a decent emergency fund for students. For instance, you could buy a $100 gas gift card in case your child needs to make an emergency trip home or a $200 Visa gift card for other types of emergencies. Just make sure the gift card doesn’t charge fees for unused money after a certain time period.
Rob Berger is the founder of the popular personal finance blog, the Dough Roller .