A custodial account is one in which a parent or guardian acts as the manager for the account, but the money actually belongs to the child. This allows a child who is too young to open or properly manage a bank account to have money in her name. In most cases, the custodian can use a debit card to access the money.
Checking accounts almost always come with debit cards. These cards allow the account custodian to easily access the funds and pass them along to the minor who benefits from the account. With a custodial account, the minor does not get a debit card because that would allow the minor to access the funds himself and potentially spend them on something that the custodian does not approve. One of the goals of a custodial account is to prevent that from happening.
If the custodial account is set up as a savings account, it might either have an ATM card or no card at all. This is because a savings account is designed for infrequent deposits and withdrawals, rather than for everyday use in making purchases. The ATM card can provide convenience for the custodian to make deposits or withdrawals at an ATM instead of going inside the branch.
Debit Card Use
When a custodial account has a debit card, the custodian must use the debit card only for purchases that directly benefit the minor and are outside the realm of basic necessities which parents are responsible to provide. Therefore, a custodial account debit card could be used to purchase a new computer for the child, but not basic school supplies. Custodians who use the debit card for improper purchases could be prosecuted.
Debit Cards for Minors
A parent who would like their child to be able to use a debit card by herself needs to either set up a joint checking account or, if the child is old enough according to the bank and state's standards, have the child open a checking account alone. For example, Wachovia allows children ages 15 and older to open individual checking accounts with a debit card. However, parents should be aware that this allows the child to spend money on anything, so unless the child is responsible or is allowed to buy anything, a custodial account might be a better choice.
- PSECU: Custodial Account
- Wachovia: General Checking FAQs
- DeLucas, 2020.
- U.S. Bank. "Digital Payment Platforms Primed to Topple Cash." Accessed Feb. 3, 2020.
- Calcite Credit Union. "Reasons to Get a Debit Card for Your Kid." Accessed Feb. 3, 2020.
- Henske, 2020.
- Conference of State Bank Supervisors. "Statutory Requirements for Opening Bank Accounts for Minors by State." Accessed Feb. 3, 2020.
- Alliant Bank. "Kids Savings Accounts." Accessed Feb. 3, 2020.
- BECU. "Teen and Youth Checking." Accessed Feb. 3, 2020.
- Consumer.gov. "Using Debit Cards." Accessed Feb. 3, 2020.
- Consumer.gov. "Prepaid Cards." Accessed Feb. 3, 2020.
- Federal Deposit Insurance Corporation. "Prepaid Cards and Deposit Insurance Coverage." Accessed Feb. 3, 2020.