November 17, 2010
& Weak Protections Like Other Prepaid Debit Cards
SAN FRANCISCO, CA – Last week, the Kardashian sisters launched a new prepaid debit card targeted at their teen fans that aims to use their celebrity status to tap into the growing market for paying with plastic. But the Kardashian Kard comes loaded with many of the same hidden fees and weak consumer protections as other prepaid cards, according to Consumers Union, the nonprofit publisher of Consumer Reports.
“There’s nothing glamorous about a prepaid card that comes with a bunch of hidden fees and other gotchas,” said Suzanne Martindale, Policy Associate for Consumers Union, the nonprofit publisher of Consumer Reports. “Don’t try keeping up with the Kardashians by falling for this celebrity-hyped prepaid card. There are more affordable and safer options to managing your money and paying with plastic.”
Consumers Union detailed the downside of prepaid card in its September 2010 report: Prepaid Cards: Second-Tier Bank Account Substitutes.
Consumers signing up for the Kardashian Kard have two options: A six month plan for $59.95 or a 12 month plan for $99.95. The six month plan covers the $9.95 purchase fee, $5 minimum deposit, and a $7.95 monthly fee for the duration of the plan. The 12 month plan is identical except it includes the $7.95 monthly fee for the full year.
In addition, consumers will be subject to a $1.50 fee for withdrawing funds at an ATM (plus the fee the ATM operator charges); $1 fee if ATM or point of sale transactions are declined; $1 fee to check balances at ATMs; $1.50 to speak by phone to a customer service representative; and $9.95 to replace a lost or stolen card.
After the initial six or 12 month purchase period for the Kardashian Kard expires, consumers must pay a $7.95 monthly fee for as long as they use the card. Cancelling the Kardashian Kard will result in another $6 fee.
When prepaid cards like the Kardashian Kard are lost or stolen and used by others to make fraudulent transactions, consumers are not protected by the same regulatory and statutory safeguards that enable consumers using traditional bank account-linked debit cards to recover their money. If a consumer contacts a card issuer about a lost or stolen debit card within two business days, the consumer’s liability is limited to up to $50 (or up to $500 if the consumer reports the debit card lost or stolen after two business days). By contrast, prepaid cards may only have voluntary protections that could be revised or rescinded at any time for any reason.
Tips For Consumers Considering Prepaid Cards
Consumers Union offered a number of tips for consumers considering the Kardashian Kard or any other prepaid card:
• Consider a regular bank account instead—you get a debit card, a monthly statement, and full consumer protections. Don’t opt in for “overdraft protection” to avoid costly overdraft bank fees.
• If you decide you want to use a prepaid card, find and read the fee schedule before you buy one. Your cost will vary widely depending on which prepaid card you pick. Make a list of how you will use the card and compare the fees. Try to figure out the costs for two months so that you can get a better idea of the full cost of using the card.
• Keep track of your balance –you might face high fees for going over your card balance. Sign up to receive a written statement in the mail to keep track of your money.
• Don’t get a prepaid card that comes with a credit line or overdraft loan to avoid overspending and going into debt.
• Do not use prepaid cards to purchase gas at the pump, for hotels or rental cars. If you do, you may find you will not have access to more funds than the purchase and for a long period of time.
• See if your card has different fees to choosing signature instead of PIN, or selecting the “credit” option instead of choosing the “debit” option.
• Don’t rely on a prepaid card to build a credit record because most prepaid card issuers don’t report customer information to the major credit reporting agencies.
Michael McCauley – 415-431-6747, ext 126 or firstname.lastname@example.org