Pre-paid cards could help track students' spending

Giving your kids school dinner money or cold hard cash for a day trip can be a bit of chore and you can never be sure its being spent in the way you'd like. But thanks to an experiment taking place in one of the UK's most famous independent schools parents could see some of the hassle taken out of the daily cash call and enjoy greater control over when and where money given to their children is spent.

Berkshire-based Wellington College, which has 930 pupils, will from the start of the new school year be distributing prepayment cards to parents and pupils, in a scheme likely to be rolled out by other independent schools and possibly even the state sector in the future.

The Freedom 4 Schools MasterCard allows parents to control much more closely the amount their children spend and where they spend it. The parents will get the "primary" prepayment card which can be loaded with cash. This money can be transferred by the parent either online or via mobile phone to the child's card – called a companion – who is then free to withdraw money from ATMs or spend it in the school grounds and in up to 26 million outlets worldwide that accept MasterCard. The Freedom 4 Schools card has no credit facility and parents can monitor exactly how much has been spent and where through a website.

"In the past, children have started term with cash or a series of cheques which are then cashed in school," Tessa Hardy from Freedom 4 Schools said. "That had drawbacks for the school and parents in terms of administration, keeping track where the money was being spent and, of course, the potential for accidental loss." The card also offers the extra security of chip and pin technology and pupils can receive regular text message updates on their balances so that they can avoid running out of money unexpectedly.

"I like this aspect of the card very much. If a pupil were to run out of money at, say, a station, they could call or text their parents who could then remotely download cash on to the card," says Susan Meikle, the bursar at Wellington College. Downloads take only a matter of seconds and cash can be transferred from the primary to the companion card in about 10 minutes. Eventually, Ms Meikle says, she would like Wellington College to become cashless. "We are going to see how it goes, but I imagine pupils and parents alike will like it," she says. Freedom 4 Schools says it already has interest from several other prominent independent schools in rolling out the scheme. Looking further ahead, Ms Hardy even sees the state sector getting involved.

"There is also nothing to stop this from being adopted in the state sector. For instance, dinner money could be loaded on to these cards by parents or the local authority," Ms Hardy said.

But prepayment cards have a sketchy reputation. Although recognised as a safe and efficient way for parents to control their kids' spending or for people holidaying abroad to avoid excessive transaction fees, they can still be expensive. "The big bugbear with prepayment cards is the levying of multiple fees. For example, there can be fees for loading money, withdrawing cash from an ATM, or monthly and annual charges even for simply using the card," said Ricky Bruce of financial information service Moneyfacts.

The Freedom 4 Schools card is far from free. Those parents opting for pay-as-you-go will have to pay £1 to load money on to the card, a transaction fee of 2.75 per cent and cash withdrawal fee of 1.5 per cent. But in return for a £3.95 monthly charge, transaction fees will be waived and cash withdrawal fees capped at 95p.

"These charges are pretty standard for prepayment cards," Mr Bruce said. "Generally, for those that make a lot of purchase transactions, the monthly fee option is likely to be the cheapest."

Widespread use of prepayment cards in schools could lead to other dangers, Mr Bruce warns. "Instead of bullying going on to obtain money, it may be used to get a pupil's pin number. I also worry whether it's a good idea to get children used to spending on plastic rather than cash even if it is all prepaid and there is no credit facility."

"Yet prepayment cards do have their uses," Mr Bruce says. "They can be useful when travelling abroad as the exchange rates on offer can be good. I can also see how they could be useful in a closed environment such as a school as it will allow parents to keep a close eye on what their children are spending."