It sounds like a really good idea.
Here’s a card you can use as a handy-dandy tool. All the convenience of credit or debit without the fear of overdrafting or falling into debt.
You just load it up with more funds whenever you need more cash to spend with the flip of you wrist. What a great worry-free way to teach youngsters how to manage finances. That is if you don’t mind getting hit with a butt-load of fees.
Sidenote: My mom (bless her heart) reads every post on this blog. She doesn’t like it when I use words like butt-load. She thinks it is very unprofessional. What do you think? Is it okay if I say butt-load every now and then, or do you think it is unprofessional too? Please comment below)
Something stinks about these prepaid cards. A whole butt-load of stink!
These prepaid cards recently came big news when a product featuring not-so-talented reality stars the Kardashian sisters got some bad publicity.
First of all – I know there have been plenty of wisecracks made already – but do you really think a card featuring spoiled brat rich chicks is a good way to inspire young girls to spend wisely? Doubt it.
But the real issue with these cards had nothing to do with the Kardashians. Apparently, fees connected to the prepaid card could cost you more than $100 a year!
After the media caught wind of this, and Connecticut’s Attorney General called the Kardashian card “predatory,” the pseudo-celebs decided they wanted out.
Apparently tabloid stories are okay, but this was a public relations mess they wanted nothing to do with. Luckily only about 250 of the cards were sold, and those people will get their money back.
But it’s not the end of this growing trend.
The newly released Federal Reserve Non-Cash Payment Study shows that prepaid cards are the fastest growing type of payment.
Targeting teens and even kids seems to be the way things are heading…
A post on The Consumerist shows that not long after the Kardashian card got canceled, a new line of “kid-friendly” prepaid cards came to light. They are called Myplash cards and depict adorable cartoons and even Twilight characters.
But the cards -not vampires- are what will suck the lifeblood right out of your checking account. Here’s a look at some of the fees attached to a Myplash card.
It will cost you $6.95 to activate it, $4.95 per for a monthly fee, $1.50 to use it at an ATM, $4.95 whenever you want to reload it.
The Kardashian card also had fees attached like $1 to check the balance and $6 to cancel the card.
Most young people don’t have the income to support all those fees. So I’d assume it’s the kind of thing a lazy parent would do to give their kid some spending money.
If you really want to teach your children about personal financial management, get them a checking account with a debit card and order checks online.
Sure…it’s a little old fashioned. But it will teach them about the real world and how to be responsible. When your kids use personal checks with a check register, they’ll begin to learn how to budget. Try to find a free checking account that will be without the kind of fees you get with those prepaid cards.
You can even let your teens pick out the style of checks they want. We offer a lot of cool checks at Check Advantage, and we’re adding more designs all the time.
Consumers Union conducted a study on prepaid cards back in 2009. It not only found that this form of payment was loaded with hidden fees, it also provides “inadequate protection.” Prepaid cards are not regulated by the federal Electronic Funds Transfer act or the Fair Credit Billing Act. So if your prepaid card is stolen and used fraudulently – you are S.O.L. (sorry Mom).
Ed Meirzwinski of U.S. Public Interest Research Group told CreditCards.com that prepaid cards represent “all of the bad parts of the current system with none of the benefits.”
The Consumerist recommends either a Wells Fargo teen checking or USAA Teen Checking account. There may also be special programs for kids and teenagers at local banks and credit unions in your area.
Kasey Steinbrinck writes about personal finances and the economy for Check Advantage. The online company offers cheap checks including QuickBooks checks for small businesses. Contact Kasey to request free original content for you blog or website.
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{ 4 comments… read them below or add one }
Prepaid cards don’t have “hidden fees”: you can find their fee schedules on their websites. This is what prompted the quick demise of the Kardashian Kards: their outrageous fees where in plain sight for all to comment on, within hours of their launch.
Meanwhile, banks almost never list their checking account fees. Pretty much no checking account is “free”: banks make money out of overdraft fees, or monthly fees when minimum balances are not met, on checkbooks, etc… Expect the average monthly cost of checking accounts to rise to about $10/month in the US next year, as the financial regulations forbidding banks from charging systematic overdraft fees go into effect.
There are good choices for teenage prepaid cards that have low (and sometimes $0) fees: check the American Express Pass, the Discover Current, the UPside Visa or Visa Buxx, the PayPal Student Card.
Thanks Patrice.
You are right about two things. You can find the fees on the website for the prepaid cards – perhaps “hidden” was the wrong word. That’s how a lot of other articles had described them as well and I used that word without thinking it through. I should have just gone with something like “ridiculous.”
You’re also right about how it’s getting tougher to find free checking accounts (we’ve written about that as well http://blog.checkadvantage.com/2010/08/13/bank-fees/ and http://www.checkadvantage.com/free-checking-disappearing.html ).
Just like the prepaid cards you mentioned – it is possible to find the right checking account if you shop around.
I stand by the idea that giving prepaid cards to kids is a good way to start a bad habit. But thanks for pointing people to cards that won’t rip them off!
In case anyone would like more info on the UPside Visa – which Patrice blogs about and sells – here are some tables (PDFs) concerning the prepaid cards fees taken from her blog Starve a Banker.
http://www.plastyc.com/docs/FeeSchedule_ConsumerUnionsFormat.pdf
http://www.plastyc.com/docs/MonthlyCostComparison_ConsumerUnionsFormat.pdf
Definitely better than a lot of prepaid cards -but still no free of fees.
Fees on these prepaid cards can suck up your money if not used properly. remember these companies count fees they charge customers as revenue thus generating profit from these fees.
Just make sure you fully understand the terms and conditions before aplying for a prepaid card then you will know your spending limits and avoid unnecessary fees.
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