Calls Mounting for Scrutiny of Prepaid Cards Pitched to Kids
Despite the furor over the Kardashian card, a site called Myplash is still hawking prepaid cards customizable with logos and famous faces of all sorts, from stars of the tween hit Twilight movies (launched in June) to rappers to cute cartoon characters. While not as pricey as the Kardashian-branded offering, the prepaid debit MasterCards sold by Myplash still take a hefty chunk of change out of teens' pockets. Activating one costs around seven bucks, the monthly fee is roughly $5 and it costs $1.50 for ATM withdrawals. Want to dispute a charge? That costs a hefty $15.
Myplash did not respond to a request for comment."As we've said before, we think these are extremely high-priced products," says Linda Sherry, director of national priorities at watchdog group Consumer Action. Some consumer advocates have already submitted comments asking the Federal Reserve to consider legislation that protects Americans -- particularly unsophisticated young people -- from these cards. Sherry predicts that the outrage displayed over the Kardashian card will grow and lead lawmakers in Congress to take steps to rein in high-priced, prepaid debit products that -- currently -- are exempt from many of the new rules pertaining to credit cards, gift cards and bank accounts.
"We feel these are going to be under increased scrutiny by regulators," Sherry tells WalletPop. "It's probably going to be brought up in the next Congress."
This is a heartening thought, but what are parents supposed to do in the meantime? Sherry says if your child is old enough for a card, start them out with a plain-Jane checking account and opt out of overdraft protection. Sherry says that if you get them an account at your current bank or credit union, you may even be able to transfer money into their account without incurring a fee. No, their debit card won't have a picture of some heartthrob or pop idol on it, but that's a small price to pay to get a far more useful financial-education tool.
UPDATE: In the original story, it was reported that activation costs around $7; under a current promotion, that fee is waived if a user loads $25 or more onto the card initially. Additionally, Myplash says the $15 dispute fee is levied only if Myplash determines the complaint invalid.