(UPDATED to include comments from Brian Newberry, president and founder of Plastic Cash International.)
The Kardashian Kard was pulled off the shelves yesterday, but that doesn't mean financial institutions have given up on promoting prepaid debit cards to young consumers.
Plastic Cash International today unveiled its new line of MasterCard-branded Myplash cards, several of which feature cartoon characters. The Huntington Beach, Calif.-based company has been selling cards marketed with characters from the Twilight vampire movies since last summer.
Bill Hardekopf, chief executive of LowCards.com, said there's nothing illegal about youth-marketed debit cards. "But it sure bothers me as a parent and seems to cross over the line of what is good taste," said Hardekopf, the author of author of The Credit Card Guidebook, in a prepared statement.
Brian Newberry, president and founder of Plastic Cash, said the cards are marketed to teens, and it makes sense to use card images they'd relate to. The cards are geared at consumers as young as 13, Newberry said.
"We're a teen company -- that's what are," Newberry said. "The images are on the cards because they're what teens asked for."
Newberry described Plastic Cash as a socially conscious company that aims helping young consumers and their parents "and not about gouging teens."
Fees on the Myplash cards are low, at least compared to many other prepaid cards. And the fees are significantly lower than those on the discontinued Kardashian Kard, which required enrollment fees of $59.95 for six months of use or $99.95 for 12 months, plus $7.95 for each additional month.
The activation fee for the Myplash cards is just $6.95 - although that fee is being waived under a current promotion. The monthly fee is $4.95. It costs $4.95 to add money to the card from a credit or debit card; 50 cents to transfer money from a bank account; $1.50 to use an ATM; $15 is a disputed charge is determined to be legitimate; and $6.95 to replace a lost or stolen card.
Newberry said his company, which has been in business for about 10 years, goes out of its way to tell cardholders how to avoid many of the fees. Teens can add money to cards for free, if they sign up for a recurring direct deposit plan. They can avoid ATM fees by using cash-back options at big retailers, and they can avoid paying to find out a card's balance by reading the account updates that are regularly e-mailed and texted to cardholders.
Prepaid cards are a good option for consumers with bad credit or those too young to have a credit card. But consumer groups warn that the cards often are embraced by unsophisticated consumers who don't realize how quickly card fees can drain their accounts.
Hardekopf says young consumers would be wise to stay clear of most youth-marketed cards and get a debit card the old-fashioned way, by opening a traditional checking account. The fees are lower, and checking accounts -- unlike most prepaid cards -- help improve credit scores.
Newberry acknowledges that teens can't build a credit history by using his cards. But, he notes, they can't ruin one either. There's no way to use prepaid cards in any legal way that causes any serious harm to the creditworthiness of cardholders or their parents.
And, even with traditional checking accounts, it'll be tough for most teen consumers to find banks willing to enroll them in checking accounts that cost less than $4.95 per month, the Myplash monthly fee.
(Free checking used to be the norm, but it was subsized by overdraft fees that would have made the makers of the Kardashian Kard blush. With tighter restrictions on overdraft fees, free checking is slowly disappearing -- and just about unheard of for teens.)
