Beware celebutantes bearing prepaid debit cards
The financial crisis gave credit cards a bad name, and the ensuing regulations made it harder for banks to profit using the hidden fees and opaque pricing that once powered their profits. But in crisis, there's opportunity:
Enter the Kardashian Kard, which not only appeals to young consumers but also has more fees than the Kardashians have reality shows. First there are the upfront costs. For a six-month card customers pay $59.95, or $99.95 for a 12-month card. (The median fee for similar, non-Kardashian-festooned products is $10.) After those six or 12 months, there is the $7.95 monthly fee to keep using it. Users pay a $1.50 fee to withdraw cash at an ATM and a $1 fee to check their balance. They pay $1.50 to speak with a customer service representative. If they lose their card, they have to pay $9.95 to replace it. If they want to cancel their card, they have to pay $6.
So let's pretend that our teenage Kardashian fan somehow harasses her dad into getting her a six-month Kardashian Kard for her $200-a-month allowance. That would be $1,200 for the life of the card. But she checks her balance on average once a month, withdraws cash at an ATM a couple of times, and calls customer service when the card cracks, requiring replacement. At the end of six months, for $1,200 in spending, she would have paid $80.40 in fees—about 6.7 percent of her "balance." If the teenager had a checking account with a debit card, the fees would probably be somewhere between zero and $36.
Photo credit: Chicago Fabulous Blog.
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