Why Your Kid's No-fee Overdrafts Carry a Hidden Cost

We never ding kids (or parents) for overdrafts. Trying to spend more than the amount loaded on a FamZoo card results in a harmless decline without a fee. Of course, I hope the decline induces a slight twinge of embarrassment as a reminder to check the balance next time. 😳

So, no-harm-no-foul if our kids repeatedly hammer away at the cards with Xbox, Spotify, and iTunes charges they can’t cover, right?

Not quite.

Consecutive declines will ultimately lock down the card. Why? Pounding away at a card with no regard for the balance is often a signal that it has been compromised. Our card processor doesn’t want some fraudster periodically polling the card waiting to pounce on a freshly reloaded balance. Instead, our card processor will block the account until the cardholder calls in to confirm the legitimacy of the transaction activity. A bit of a hassle.

Inconvenience aside, there’s a far more important reason to clamp down on runaway declines.

It’s just poor personal finance hygiene.

We’re trying to teach kids to be mindful spenders, not mindless ones. Besides, those declines probably won’t be free later when our kids graduate to real banks — even if they carefully opt out of overdraft protection. Check out this sneaky automatic billing overdraft loophole that many banks use to collect fees even when we think we’ve skirted them. Not cool.

So, turn on activity alerts to stay on top of declines. Have a talk with your kid whenever you see a rejected transaction.

If talk doesn’t curb the habit, you can always impose your own Bank of Mom/Dad overdraft fee — kinda like a family swear jar. Tap the debit icon and dispense a little 25 cent fine every time you see a decline.

That’s the kind of activity alert our kids will notice. 😉