Thank goodness for celebrities. Without them we might never fully appreciate blatant self-interest, and we definitely would not have so many occasions to discuss the evils of fee-laden prepaid debit cards.
The latest star with plans to fleece his adoring public is teen hit-maker Justin Bieber—with a hearty assist from an online finanical firm that goes by the unfortunate name BillMyParents. The card, announced last fall, is set to go live in the next week or so. As part of the endorsement deal, Bieber is expected to appeal to young people to learn more about personal finance. If he is successful with such an appeal they won’t use his card. Go figure.
With 50 million Facebook fans and 32 million followers on Twitter, a Bieber card might seem like money in the bank—for the Biebs and the sponsoring website. But hits are difficult to predict. You have to wonder if Bieber’s babysitters paid attention to the failed Kardashian Kard, launched in November 2010 and quickly taken off the market amid rampant criticism of its predatory fee structure.
The Kardashian sisters were subsequently sued for breach of contract. They prevailed in that legal entanglement. But what star needs this kind of publicity?
Financial guru Suze Orman, whose prepaid card looks good next to other star-powered offerings, has endured grief as well. Orman’s Approved Card launched a year ago amid criticism that, as a trusted money adviser, she should always steer her fans to the most economical prepaid cards on the market. Her card would not qualify.
Prepaid debit cards are not inherently evil, and there is a place for those marketed directly to young people. Among the advantages:
- Kids can use a pre-paid card to shop online.
- Parents get a detailed spending report.
- Over drafting is not a risk.
- Pre-paid cards are easy to re-load and thus may be good vehicles for paying allowance, assuming no or low re-load fees.
- Kids become familiar with plastic in a controlled environment.
With the Bieber card, parents can receive text alerts each time the card is used, block the card’s use at certain stores, or temporarily freeze the card if they like. But all of these advantages mean little if the fees are outrageous. After all, this is your money. You expect to pay something for convenience. But the costs shouldn’t make you wince.
The Bieber card comes with a monthly fee of $3.95. There are $2.95 loading charges from debit or credit cards and 75-cent loading charges from checking and savings accounts. If you lose the card it will cost $7.95 to replace. The card also charges 50 cents per balance inquiry and $1.50 per withdrawal. If you don’t use it for 90 days you get socked with a $3 inactivity charge. There are far better deals out there.
(MORE: What Free Costs)
With regulators tightening the screws on credit card terms, many financial firms have been sweeping into the less-regulated prepaid card market. Nearly half of all U.S. households bought a prepaid card in the last 12 months. The market is projected to reach $1.7 billion in annual fee revenue by 2016, Bloomberg Businessweek reports. By then, Americans will have $168 billion loaded onto prepaid cards.
The Consumer Financial Protection Bureau has been reviewing the prepaid market since May. But so far the watchdog agency has done little to keep stars from soaking their fans with avoidable prepaid card fees. Only consumers can do that by steering clear of predatory products. Sometimes it works. Ask the Kardashians.