Credit card issuers provide student debit cards to college students, in the hope that when the students graduate and become productive income earners, they will maintain their relationships with the bank that issued the cards. Student debit cards come in several forms, including cards that parents cosign for, pre-loaded debit cards, and cards that charge a small fee each month. Most student debit cards carry the logo of a major credit card company and can be used anywhere such logos are accepted.
The primary attraction of a student debit card is parental control. In many cases, the parent secures the card and gives it to the student to carry. The parent loads the card with funding as needed. Some families require a weekly or monthly accounting to determine whether the student uses the card responsibly. The cards usually have an online method for tracking use, giving parents instant access to their student's spending behavior.
Preloaded student debit cards generally require an initial deposit. They also can include a one-time set-up fee. The money is loaded at authorized locations, and the funds are available for spending within a few minutes.
Student debit cards using this method usually have a daily allowable spending limit. These cards can help make parents feel secure that their student won't go through all the money too quickly and will be forced to budget because of spending constraints placed on the card. If no funds remain in the card's account, attempted transactions are declined.
Student debit cards attached to bank accounts use the money in the accounts to pay for purchases. Students use the card anywhere debit cards are accepted. When the student swipes the card, the money is immediately earmarked at the bank to cover the transaction. Such student debit cards can lead to overdraft fees if the bank account is set up with overdraft protection. The account holder has the option to refuse overdraft protection on the entire account, in which case, attempted debit card transactions that exceed the account balance will be declined.
Many financial institutions also offer credit/debit card combinations. The student decides at the time of each transaction whether it should be run as a credit or debit. If it runs as a credit, interest is charged, and the transaction total is added to the current credit balance, to be paid in installments. If the student has the transaction processed as a debit, the money is immediately removed from the bank account funding the card, and no interest is charged. In many cases, parents are asked to cosign on combination credit/debit cards, making the parents and students share the debt liability.