Debit cards have less protection than credit cards. If a debit card is compromised, the chances are money had already come out of the checking account before your kid realized it. Credit cards also generally offer more benefits and rewards as they’re more profitable for the banks (because many choose to pay less than the full amount or forget to pay altogether).
BTW, my S walked into a Chase branch last week to apply for the Chase Freedom Student Visa card and was approved on the spot. The card has pretty decent benefits for a student credit card: https://creditcards.chase.com/a1/freedom/student
He did open a Chase checking account nearly a year ago and is a rising sophomore.
S had a fraudulent charge on his debit card this spring. It was ridiculous what we had to do. Eventually he got the money back, but after jumping though many hoops including having to close his checking account and open a new one with a different account number.
He has a debit card that is supposed to be for most things, and my credit card for gas and groceries. I think there is a $15,000 limit, all of my kids get put on when they start HS because they start driving then. All have charged a meal or 2 at Qdoba or something similar, but that’s the extent of the abuse, and it all happened in HS not college. He sent me money on Venmo the other day because he split groceries with a buddy so he sent me money for the buddy’s share.
After the debit card debacle, I told him any remotely questionable charge goes on the credit card not debit card, and he can pay me back.
@Knowsstuff I’ll have to look into it more. My husband and I never financed anything until we bought a house. We only bought cars we could pay for with cash. We never had a problem getting a credit card out of college. Wonder if things have changed.
@techmom99 stated why students need credit histories.
My son recently leased an apt in NYC and I did not need to co-sign because he has a solid credit history after years of having a card on a couple of my accounts and then two CCs of his own. He replaced the student card with an ‘adult’ card that offers double points on all purchases, and now only uses the newer card.
We treat CCs as debit cards. I had each of my children set up autopay out of their checking account for the full amount of the bill. One ‘bounced’ a payment only once, not realizing that the checking account & savings account balances were only linked online. He hasn’t made that mistake since.
@dadof4kids I’m glad your kid got their money back. My co-worker’s dad did not. Lost $1500 before he was able to close the account.
@homerdog and things do seem to be different now, even from just 3 years ago. My older S had no trouble. Younger S could not get one from same place even with the similar history/background/etc. discover did work. We don’t have a chase or many major banks with brick and mortar locations in town. We are a small rural city.
Well I guess I’d better find out what would happen if our son’s debit card was hacked. His account is in a major national chain bank that we have banked with for 30 years. We are the highest level of customer and his account is connected to our accounts. I find it hard to believe that this bank would make it so difficult to get his money back if he had some fraudulent activity on his account. I wish I knew who to ask for advice on the credit card issue who isn’t in the financial services business. I’m sure they tell everyone that young adults need a credit card to build credit. We won’t get S19 one yet. He is an authorized user on our one credit card but we haven’t given him the plate yet. Maybe I’ll just use it if he needs to build credit. lol.
My kids both had debit cards for their checking accounts. One never had any trouble, but the other had fraudulent use several times. I swear it is because she uses it all the time at fast food and other shops, but often the fraud is at stores located many states away so who knows. The CU always freezes the account and usually refunds the money within a day or two - but by federal law they don’t HAVE to. Debit card rules are a lot different than credit card rules. If you dispute a charge on a debit card and the money is already out of the account, the bank/CU doesn’t have to credit you with the amount while they investigate They have like 30-60 days to look into it. Our CU always did, but the issue is that they then have to issue a new card with a new number, so 1) she doesn’t have ANY card for those few days and 2) she has to notify any creditors where she has an automatic payment (Spotify or something like that).
Also, debit cards don’t add much to your credit score. Credit cards build credit a lot faster.
My son-in-law didn’t think he needed to build credit until he tried to get a bank loan for a used car and they turned him down. He had to get a cosigner. So he started with a prepaid card and is slowly getting there.
I used a debit card exclusively for twenty years and the protections on it were the same as a credit card. Maybe that has to do with the issuing bank. I only changed to a credit card so I could bankroll the points to feed my book habit.
By law, a debit card is different than a credit card. A bank can give you many of the same protections like putting the money back into your account/on the credit card while they are investigating fraud, but they don’t have to and can change the rules to conform to federal rules at any time.
You also do not build credit with a debit card. With a debit card, you are using your own money and not borrowing anything. With a credit card, you are borrowing any amount you charge and repaying as agreed. That increases your credit score.
@homerdog - no, their usage didn’t have much to do their credit ratings. I was responsible for those cards and because their names were on it they also got credit for the overall usage. My credit limits were very high on those cards and I always paid them off, therefore their % of credit used is very low and it is an important factor of credit score.
Of course, if a parent is irresponsible in using those cards then the bad ratings would also transfer to the kids.
One mistake I did is that initially I put my kids on a business account as employees. That credit does NOT transfer. So when S went to get a car loan last year, he had no credit profile. Even though the car loan had both of our names on it, they still really socked him pretty good on the rate. It would have been a lot cheaper if I didn’t put his name on the title.
I do not have evidence it works, but am hoping that by now having his younger siblings on my personal account I am building their credit. I also moved him there, so he will have the car loan and hopefully the credit card to help him when he buys a house someday.
When my daughter bought a car last year, it worked out better for me to be a co-owner. She not only got the lowest rate because I have a high credit score, it also counted as a second car on our insurance so she got a much better rate there too.
Her credit score goes up every month. Only a few points (after a large initial rise), but every little bit helps.
Even if the bank is less difficult about restoring money stolen by debit card fraud, the missing money could have other effects, like causing checks written on the account to bounce.
My son mostly uses a debit, and I don’t worry about it. He only keeps a minimal amount in checking and the rest is in savings, so even if someone were to fraudulently access his account they wouldn’t get much and any charges over the amount he had in there would be denied. He doesn’t use checks either. I’m confident our credit union would make good promptly.
He just has one of my credit cards for things I would normally pay for him. I’m not super concerned about him getting a credit rating young either, but he’s knows he’s too poor for loans.
