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Saturday Money: A mobile banking app and debit card ... for 8-year-olds: Spending It is prepaid and claims to instil good habits early - or should that instead read 'bad habits'? Jill Papworth reports

July 5, 2014

Jill Papworth



Should children as young as eight be allowed to have their own MasterCard so they can shop online? TV presenter Davina McCall is endorsing a prepaid debit card launched this week that youngsters can use in shops and on websites, and to withdraw money from cash machines.

Osper is a mobile-only banking service which it says will help the UK's seven million eight to 18-year-olds by "instilling good money habits earlier in life". Others might argue that it is training primary school children to be consumers and bank customers.

The scheme consists of a prepaid MasterCard debit card, combined with a mobile phone banking app, for the child and its parents. Parents load money from their debit card on to their child's Osper card account, with the app enabling them to monitor transactions and receive warnings when funds are low. Youngsters can only spend money that has been pre-loaded - there is no credit facility. The card is not contactless, so if it is stolen the thief will not be able to quickly run up debts. There is also a lock function which both parents and child can enable from the app if the card is lost or stolen, to block all purchases.

However, this is not the first prepaid card aimed at kids and their parents. Osper's main rival, goHenry (gohenry.co.uk), which is also aimed at eight to 18-year-olds and comes with a prepaid Visa card, will arguably appeal more to parents, particularly of younger children, because it allows them to set controls on its use.

There are also a number of prepaid cards aimed at teenagers, including MeCard (a MasterCard) and Splash

(a Maestro card).

Most UK banks make children wait until at least 11 years old to get a debit card, with some, including Barclays and Nationwide building society, only giving cards to those age 16 and over.

Lloyds sparked controversy in 2008 when it emerged it had begun sending children as young as 11 Visa-enabled debit cards without the knowledge of their parents, enabling them to buy cigarettes, drugs and X-rated videos over the internet.

Guardian Money highlighted the case of a boy in south Wales who was delighted when the bank sent him a Visa debit card without informing his parents. What was his first purchase? A box of 200 cigarettes, bought over the net from a Swiss-based company. His second was Viagra and his third a fake ID card, also over the internet.

Both Osper (at Osper.com) and goHenry have pre-programmed restrictions preventing youngsters from using their prepaid cards to buy adult items such as alcohol, tobacco, online gambling and so on. But the goHenry service also enables parents to set controls on spending limits and where its prepaid Visa card can be used. So if, for example, you don't want your eight-year-old to be able to spend all their money playing Minecraft or on iTunes, you can temporarily block online purchases.

Users of the goHenry service can also set budgets and saving targets, and track and filter spending by retailer, size of spend and category. Parents can allocate pocket money automatically, set tasks, such as household chores, to enable children to earn extra cash, and make instant one-off money transfers.

But there are charges.

Though free for the first year, Osper costs pounds 10 a year per child, with a pounds 5 fee for closing the account after the first 12 months. Other charges include pounds 3 for a replacement card and pounds 1 to withdraw money from a cash machine abroad.

At goHenry, after a month's free trial, monthly membership costs pounds 1.97 per child. Loading money to an account from a parent's bank account is free but costs 50p per load from a debit card. Other charges include pounds 2 per withdrawal from a cash machine abroad and pounds 5 for replacing a lost, damaged or stolen card. There is no charge for closing a goHenry account.

But are these services really worth it, when youngsters can get a current account and debit card with no overdraft facility for free from several banks, including Lloyds, Halifax, HSBC and Santander?

"Banks essentially offer an adult account to a younger person (while) goHenry offers a way for young people to learn about budgeting, saving and spending responsibly in a safe, secure and monitored environment," said a spokesperson for the service, which was launched in 2012 by a group of parents.

"The mobile app and online account provides visual, clear and interactive graphs to help both young people and their parents understand how they are using and saving their money, rather than simply being traditional lines of text on a statement from a bank."

Captions:

Want to go shopping? Now you won't need to use Mum's credit card Getty


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Source: Guardian (UK)


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