A few weeks ago, I praised the launch of the Kardashian prepaid card. Now, much to my chagrin, I am eating my words. And the Kardashians are being sued for $75 million for withdrawing their endorsement of their “Kard”, which failed miserably and drew a wave of objections for its exorbitant fees.
Despite the Kardashian debacle, prepaid cards are growing in popularity. According to the USA TODAY, “The total amount of branded prepaid cards is expected to exceed $440 billion by 2017, quadruple the estimated value in 2009, according to independent research commissioned by MasterCard.” Put another way, when the tween stars from the movie “Twilight” are used to sell financial services, something big is brewing.
As if on cue, consumer activists and politicians have refocused their criticism from traditional credit cards to prepaid cards. Consequently, the relatively good image of prepaid cards is fading fast. No longer are they being touted as a safe or responsible alternative to unsecured credit cards, especially for consumers aiming to build credit.
Opponents of prepaid cards highlight the excessive fees for features that are normally free with more mainstream products. For example, there are fees to load the card, withdraw money, maintain an active account, and even cancel the card. Also, prepaid cards are not heavily regulated and do not fall under the Credit CARD Act. One of the most expensive cards (endorsed by popular radio host Tom Joyner) charges an $8.95 monthly fee to keep the account active.
On the other hand, proponents argue that having such cards are better and less expensive than using a check cashing business, a popular option for the unbanked. Furthermore, they tout the flexibility of the cards to pay bills and make everyday transactions.
In short, despite the recent spate of criticism and political cries for regulation, I still think the concept of a prepaid card is solid. Moreover, there are good options on the market. In fact, Walmart offers a product with very low fees. As is the case with many credit products that thrive on misdirection and deceit, we must better educate all consumers, especially the most vulnerable ones, about the dangers of really bad products. Otherwise, the bloodsucking vampires will prevail.
Read more about this topic at USA TODAY.