Because 18-year old celebrity musical superstars cannot have enough money, welcome to the world of Justin Bieber and his newly announced position as spokesperson for the Bill My Parents prepaid debit card called SpendSmart. With over 33 million Twitter followers and over 51 million Facebook fans, SpendSmart probably couldn’t have picked a bigger star to promote its new product. Lots of publicity on social media; very little cost to the company.
Over the past few years, any number of celebrities ranging from Suze Orman (who should really know better), Hillary Duff, and the ubiquitous Kardashian Klan have had their own prepaid debit cards. The cards are usually heavily promoted by whatever celebrity spokesperson has been linked to it and typically targeted to younger people, people who don’t have bank accounts and people with credit issues who can’t get a credit card on their own.
According to a report cited in U.S. News, it’s estimated that users loaded $82 billion onto these prepaid debit cards in 2012 and projections for 2013 are that this number will climb to $117 billion.
The bad thing about these cards is that they usually come with fees for virtually everything you want to do. Activate the card? Pay a fee. Using an ATM to get money? Pay another fee. Don’t use your card for 90 days? Get hit with an inactivity fee. The privilege of having the card at all? Be prepared to pay a monthly fee. If you’re not careful, your fees could wipe out the value of your card entirely.
In 2010, there was a big public relations mess for the Kardashian sisters and their prepaid debit card. Sales of the card were ended a few days after the Connecticut Attorney General Richard Blumenthal issued a statement criticizing the card and labeling it as targeting financially irresponsible teenagers. According to Blumenthal, the card was loaded with what he called “gotcha fees”, including a $99.95 annual fee, a $7.95 monthly fee and additional fees for using an ATM, loading more money on to the card, and even talking to a live person about the card.
But, according to SpendSmart, their fees are minimal ($4 a month to use and $3 if your card hasn’t been used for more than 90 days). And there are some positive features to SpendSmart that are designed to let parents control how and where their teens spend the money loaded onto the card. Instant text alerts let parents know when and where and at what time their teen used the card, as well as the card’s balance. It also allows you the option to lock (or unlock) the card by texting back to SpendSmart and has built-in blocking features to prevent them for using the card where they shouldn’t (a liquor store, for example).
Of course, having a prepaid debit card won’t help you establish, repair, or rebuild your credit as credit card agencies have stated they don’t include prepaid debit cards when calculating credit scores. The Credit Card Act of 2009 does not regulate debit card fees (the way it regulates credit card fees) so you’re at the mercy of whatever the company wants to charge you. All things to keep in mind when making a decision about getting a prepaid debit card for your teenager.
Having said all that, it looks like, on balance, Justin Bieber has associated himself with a prepaid debit card that is pretty good, both for parents and kids. And if it teaches the Beliebers how to handle money responsibility, then the world will owe an even bigger debt than we already do to Justin Bieber.
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