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DOWNSIDE: Student PayPal Accounts

DOWNSIDE: Student PayPal AccountsIf 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

  • Buying – Free
  • Selling – 2.9% + $0.30 USD to receive a payment from within the U.S.
    3.9% + $0.30 USD to receive a payment from outside the U.S.
  • Sending money to friends and family – Free
  • Receiving money from friends and family – Free when the sender uses PayPal balance or bank.
    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.)
  • Receiving money after sending a money request – Free when requesting from the parent who opened the account or from another Student account created by the same parent. Otherwise, 2.9% + $0.30 USD from within the U.S. 3.9% + $0.30 USD from outside the U.S.
  • Student Card fees

  • U.S. ATM withdrawal $1 USD (plus any amount charged by the ATM owner)
  • Withdrawal inside a bank $3 USD if a signature is required
  • Non-U.S. ATM withdrawal 1%
  • Non-U.S. purchase 1%
  • But, Wait, There’s More Fees

  • Currency conversion – Our exchange rate includes a 2.5% fee
  • * 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

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    5 Comments to “DOWNSIDE: Student PayPal Accounts”

    1. [...] Finance Posts for 2009 That Can be Used for 2010 and Beyond.The Articles Your Family Needs1 Downside of Student Paypal Accounts. Your child could getting mislead with the great deal of a student PayPal account.2. Ways You Can [...]

    2. Nathan says:

      All this fright in giving kids some control is ridiculous. I say give your kid an account with maybe a couple hundred dollars or so, and tell them they can do whatever they want. If they end up spending all of it at once and come back to you for more, tell them they have to work for the money now if they want any more. How else are they gonna learn the value of money and become financially responsible? Make them learn from mistakes.

    3. Alex says:

      I was just wondering if you realized that the parents regulate how much money is spent? The student cannot spend more money than they have in their account and ONLY the parents can add money to that account. :)

      Source of this information: Myself being a student with a student PayPal account.

    4. Lisa says:

      I love the PayPal student card I got for my son. He also has a checking account but the only way you can get money on the card is to go to his bank and deposit it but it is not available until the next day. We have used the PayPal student card for several years with no problems or fees. I put money instantly on his card from any computer if he needs gas, food or whatever and I know where he spends the money by looking at the account info and he can only spend what I put in his account unlike a bank card where you get overdraft charges. I would highly recommend this card especially for college kids.

    5. Mary says:

      I’ve used it for my teens for years, signed up w/the $10 bonus, but had to hound Paypal to pony up! I have their allowance transferred every Sunday night and they use it for all their discretionary purposes.
      Th App is awesome-you can transfer money by bumping phones! It is ideal now for the 2 at college. They can text me if they need money and I can send it in an instant from where ever I am. They can get cashback (for no fee) when they make a purchase, like at Walmart.
      I am now contemplating setting up 2 nephews that do not have checking accounts as a way for us aunts to help them out. A way for them to have a debit but not worry about steep bank fees for overdraft, min balance, etc.

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