If you have a PayPal account, you probably got a promotional offer to receive $10 for opening a “student account” (a student is defined by PayPal as age 13 or over) [fill in the blank with the lastest offer]. Tempted? I went ahead and offered myself up as a guinea pig so I could give you the fine print – which was noticeably missing from the Accept Offer page. From that page and the email offer, there is NO mention of any account fees; in fact, it appears the account is free of charges. After all, aren’t they required to disclose all fees up-front in a Schumer box under the Truth-in-Lending Act? That’s only for credit cards, not debit cards.
Financial Freedom – For a 13 Year-Old?
My parent’s mind was already worrying. Will he lose it and someone else will try to use it? They would need the correct password. No 13 year-old I know can keep anything. Would he let friends use it? One option, which you have to manually turn off, “lets your child send money to almost anyone with an email address or phone number.” Bay Area-based PayPal has been pushing new student accounts for a while now, but the pictures in the ads always show a responsible-looking college-age student and a smiling, and middle-class but not overly indulgent-looking parent. In short, they are older and savvy – like the couples in my Schwab newsletter who only have to slightly tweak their retirement plans after the recent stock market bloodbath.
Read the Fine Print
You have to dig a few links in to get to this page. I found it AFTER I accepted the 10$ free offer, created the new student account, gave away my son’s email address (!), and had a “student” debit Mastercard being sent on its way to me (pending approval). Note that you can change permissions manually at any time from the Parent Admin view, but be careful to confirm the defaults manually before the card leaves your hands (if it’s ever in your hands).
Student account fees
3.9% + $0.30 USD to receive a payment from outside the U.S.
2.9% + $0.30 USD to receive card funded payments* from within the U.S.
3.9% + $0.30 USD to receive card funded payments from outside the U.S.
(The sender decides who pays this fee.)
Student Card fees
But, Wait, There’s More Fees
* Card funded payment means a payment that is fully or partially made by credit card, debit card, PayPal Pay Later or Buyer Credit.
Why PayPal and Not Just a Friendly Neighborhood Bank?
Why a student account at PayPal for banking (or spying on your child) rather than a regular bank? Because of the ease of spending online (and of course, using EBay). PayPal is not inherently evil. Young children freely spending online is. PayPal is simply trying to corner more of the teenage spending market, run a few ads directed at your 13 year-old online shopper, and also grab some of the college student card market, now that credit cards for students have to follow the tighter CARD act rules (starting February).
I ask you this: Would you like to be notified that your child has just paid $200 on iTunes for himself and his friends using his new PayPal debit card, or would you prefer he comes to you and has to actually ask to use your card to buy a few tunes the old-fashioned, inconvenient way?
photo credit: Morguefile