Payjr is a prepaid Master- Card that allows children to shop at stores and online using their own credit card. It also allows parents to go online to track their child’s spending and deposit money into the account as needed.

During a recent trip to the grocery store, I was fumbling in my pocket for some cash when my 2-year-old said, “Here’s your money, Mommy.” She was holding my debit card.

I didn’t think much of the incident until last week, when I got an e-mail message pitching the Payjr credit card.

Payjr is a prepaid Master- Card that allows children to shop at stores and online using their own credit card. It also allows parents to go online to track their child’s spending and deposit money into the account as needed.

The company is marketing two types of cards. One for teens, the other for children 12 and under.

This, of course, is not new. The credit card companies discovered that teens were a lucrative market a few years ago. Their pitch to parents has always been that credit cards can help teach kids about budgeting and responsible spending.

Payjr tries to distinguish itself from other prepaid cards by including a feature that blocks the purchase of such things as alcohol, firearms, pornography and online gambling.

It also lets parents manage allowances online.

A parent simply sets up a list of household chores and assigns a dollar amount to each. When the child completes the chore, the parent can deposit the money into the account. The child can receive text messages or e-mail about the card balance or when money has been deposited into the ac- count. Parents pay a one-time enrollment fee of $4.95, a monthly fee of $2.95 and 50 cents each time they put money into the account.

There are a number of prepaid programs with online tracking ability, including Allow Card, MyPlash, and Payoneer. Like Payjr, all have enrollment fees, monthly fees and load fees. But some will let the child charge beyond the set limit. Payjr doesn’t, said David Jones, the founder and chief executive of Payjr.

If there is only $15 remaining on the card and the dinner costs $20, the transaction will not go through, which saves on over-the-limit fees, said Jones.

Is putting plastic into a child’s hand, especially one under 12, really going to teach the child how to manage money?

I’ve heard too many horror stories from parents whose children racked up hundreds of dollars in charges and over-thelimit fees for everything from ringtones and video game downloads to online purchases to think this is a good idea.

James P. Kniffen, a certified financial planner in Cary, N.C., has his own concerns.

“By encouraging children to use credit cards, we are encouraging them to overspend without consequences,” Kniffen said. “They assume that the money is always there and someone else puts it there for them.

“Kids need to understand that there are limited resources and unlimited opportunities to spend.”

Jones has a counterargument. “Kids are going to have a credit card eventually,” Jones said. “The earlier the better, because it gives them the opportunity to learn that they can’t overspend before they go off to college and get a real credit card and have mounting debt.”

It’s true that many college students are weighed down by debt — a mixture of credit card balances and student loans — when they graduate. The average credit card debt carried by undergraduates is about $2,200, according to Nellie Mae, which provides education financing services.

So I can see the wisdom of Jones’ argument. And the reality is, we are becoming a cashless society. I realize I am going to have to teach my daughter how to earn and manage that debit card she was holding in her tiny hand. And sooner, rather than later. But not before she’s 12.

Via The Buffalo News