Following celebrities is a mostly harmless pursuit. But
following their financial advice can be hazardous to your
Recently, Justin Bieber became the latest celebrity to link
himself to a growing trend in the financial industry: prepaid
debit cards. And although the concept behind prepaid cards
definitely has merit, especially for teens, cards that pull in
customers based on celebrity popularity are rarely the best
choice among all the alternatives you have.
What's up with the Bieber card?
signed up Bieber to promote its SpendSmart prepaid card. Given
the card's focus on teens and carrying a message of encouraging
responsible spending, Bieber's broad-based appeal among the
company's target demographic makes the celebrity a natural fit
with the card company's business plan.
But Bieber's deal is far from the first time a prepaid card
has tried to use celebrity power to bring in customers. Back in
Kardashian sisters launched the Kardashian
, a prepaid debit card that tried to use the same message.
The problem with the Kardashian Kard was that it charged truly
outrageous fees. As initially proposed, just
the card involved having to pay a "membership fee" of $99.95 for
the first year, with ongoing fees of nearly $8 per month. Tack on
plenty of other fees, including charges for ATM withdrawals,
billpay service, and money transfers, and the Kardashian Kard
raised so much negative sentiment among consumer groups that it
died a quick death
Do prepaid cards for teens make sense?
Let me be the first to say that teaching teens how to be smarter
with their money is a great goal. Given the almost complete lack
financial literacy among young people
, anything that encourages teens to be more responsible
financially for their actions deserves at least the benefit of
BillMyParents is definitely trying to tap into the wish for
parents to know what their kids are doing with their money while
keeping the process of giving an allowance as simple as possible.
With the ability for parents to get alerts that tell them what
their kids are spending money on, it's easier to hold kids
accountable for their actions. Moreover, if teens don't do what
they're supposed to, the SpendSmart card lets parents put a
temporary freeze on the card or even permanently block its use
for certain stores.
But why pay?
Admittedly, the SpendSmart card's fees aren't nearly as bad as
what the Kardashian Kard charged. But you still have to deal with
a constant drain on your money. There's no way to avoid the
monthly $3.95, and while that includes regular monthly recurring
cash deposits to the card, you'll pay more if you have to make an
emergency cash addition to the card. Fees also apply if you need
to have the card replaced or don't use the card for 90 days or
But the fact is that every prepaid card funnels money away
from you and the places you spend your money and toward card
, which benefit every time you use the card to make purchases, as
well as the card issuers like BillMyParents.
Perhaps more important, you can do better than the Bieber
card. Last year,
teamed up with
offer its Bluebird prepaid card
, which has a huge advantage in fees. Bluebird charges
monthly fee and allows free additions from any checking or
savings account. You can even set up the account for free if you
Be your own celebrity
Teen financial literacy is a noble cause, but the Bieber prepaid
card isn't the way to achieve that goal. By using a cheaper
alternative like Bluebird or even sticking with traditional cash,
you can instill important financial values in your children while
not having to pay through the nose for a celebrity
Motley Fool co-founder David Gardner may not have Justin
Bieber's popularity, but his picks have frequently trounced the
market. For a limited time, you can get a backstage pass to
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Fool contributor Dan Caplinger has no position in any stocks
mentioned. You can follow him on Twitter @DanCaplinger. The
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