Credit Cards for Kids -- Can Yours Handle One?

The companies say they're a great learning tool for teens, who will eventually largely use plastic, rather than cash, to make payments.

"You're not going to teach your kids how to use a computer by giving them a typewriter," says PAYjr marketing director Jessica Stroud.

But prepaid cards don't come cheap.

"Fees on them can really eat you alive," says Curtis Arnold, founder of Cardratings.com and author of FT Press' upcoming book How You Can Profit from Credit Cards: Using Credit to Improve Your Financial Life and Bottom Line. Pre-paid card fees to watch for include load fees, monthly fees, start-up fees, ATM fees and customer service fees.

Instead, Arnold got his high school junior a checking account -- on the condition that he attend a day long financial literacy course -- and plans to get him a debit card during his senior year.

This way, he says, he'll have a year with plastic "when his mom and I can kind of guide him."

Parental guidance with a debit card helped Arkansas high-school student Jessie Burrows learn to manage her finances more responsibly. After she turned 16, her parents helped her set up a checking account with a debit card so she could manage her income from her job at fast-food chain Subway.

"I thought I was so cool, I just kind of went crazy with it," said Burrows. Seven months later she had her second overdraft fee, and her folks canceled her card.

Now 18 and about to graduate high school, Burrows keeps close tabs on her debit card purchases. She has also opened two credit cards -- with a combined credit limit of $800. Though she carries a balance of about $250, she makes payments every time she gets paid, even if it's in between billing cycles.