All Articles Tagged "prepaid debit cards"
Justin Bieber has signed a 14-month contract with SpendSmart Payment Company, which puts him front-and-center in videos and other messaging directed at his millions of teenage fans. In videos that will be put on his YouTube page today (we don’t see it there yet), and messaging on Twitter and on his Facebook page, he’ll be talking up responsible money management and also pushing SpendSmart prepaid debit cards, according to The New York Times.
The article says Bieber is being paid $3.75 million for his spokesperson services over the next year, with stock options.
The card, previously called BillMyParents and specially designed for teenagers, alerts parents when it’s used, giving them control over spending. “The average SpendSmart cardholder is 16, and the card is used most frequently to buy food (especially fast food), followed by gas, technology (like iTunes, electronics and games) and clothing,” the Times says.
As the paper notes (and as we’ve written about here), prepaid debit cards typically charge lots of exorbitant fees, so they’re generally not recommended as a financial tool. This card also has a ton of fees as well, like $1.50 for ATM withdrawals and $7.95 for a replacement card. Though the SpendSmart folks say the fees are lower than other cards. Experts have gone on the record to say they don’t think they’re a good option for teens.
But with legions of fans willing to stand in line for hours for his concert tickets, spend their allowance on his music, and follow his every move on Twitter, Justin Bieber is likely to convince a lot of kids — and perhaps their parents — that his personal finance talk and SpendSmart endorsement are all good. Is this a responsible use of the Biebs’ celebrity?
With so many people struggling to make ends meet, prepaid debit cards have risen in popularity. The problem is, these cards have big fees.
“There are initiation fees, maintenance fees, and paper statement fees along with payment inquiry fees and don’t forget the fees on theses cards to reload with your own money range from $3.95 to $5.00 every time…” Black Enterprise reports.
However, these cards have become one of the fastest growing forms of electronic payment, up 20 percent with more growth expected in the int he next year.
Besides the fees, there are other reasons why these cards aren’t good for consumers. Click through to BlackEnterprise.com to learn more about prepaid debit cards and some of the pitfalls of their use.
(Sun-Sentinel) — When it comes time to pay, more Americans are turning to prepaid debit cards. They look like credit or gift cards, can be re-loaded with money and don’t require the holder to keep a bank account. Many South Floridians say they like prepaid cards as a way to stick to a budget and avoid overdraft fees at banks. Some also find the cards better safeguard their funds and information when they buy online. But there are problems too. Some prepaid cards charge hefty fees. Some are inconvenient to reload. And the cards have less government regulation than credit cards, South Floridians say. Nationwide, the prepaid card business is booming, partly because rising fees on bank accounts are prompting customers to seek alternatives, said researcher Mercator Advisory Group of Boston. The amount of money that consumers loaded on their prepaid cards jumped from $12 billion in 2008 to $42 billion last year. It likely will top $70 billion this year, Mercator said.
The Florida Attorney General’s Office has named a Russell Simmons company as one of five financial firms selected for investigation into criminal activity. Unirush Financial Services, maker of the RushCard pre-paid debit card, has been subpoenaed along with First Data Corporation, Green Dot Corporation, Account Now, Inc., and Netspend Corporation for making fraudulent claims and charging hidden fees.
The RushCard bills itself as a product that will help people manage banking costs better than others, but its payment structure can make the RushCard more expensive than similar debit cards offered at a flat rate. At $1-2 per ATM transaction, using the RushCard can cost much more than the $16 a year the company represents, according to EUR Web. The financial organization also promises to help improve users’ credit ratings, a point under major dispute.
Possibly misleading its customers into believing that the RushCard builds credit and provides savings are two crimes that should be severely punished, if the Florida Attorney General’s Office is able to make its case. Russell Simmons has responded to these allegations by assuring the public that he welcomes the investigation. Simmons hopes it can incite a wider debate on improving the variety of financial instruments that are offered. In support of his RushCard, Simmons stated:
“As a leader in this industry, I encourage a full understanding of RushCard’s transparent pricing, and valuable services, especially for those who have been turned away or let down by traditional banks. Third party research has shown that for many customers, the best prepaid card services offer significant savings compared to what they would pay in traditional bank checking accounts, with savings of up to 50%, as documented by third party research from the nation’s second largest bank by assets, JP Morgan and Company.
“RushCard is the solution for people who want affordable financial services that they can customize to suit their needs. As I look at the payments landscape, I see the banks as the large record chains and my RushCard is looking a lot more like iTunes. I welcome the public debate because the more educated the consumers are the more successful we become.”
Simmons has been an outspoken advocate for promoting pre-paid debit card usage over other banking methods. He claims that he wants to help the black community by providing options that save time and money. Yet, the argument that the RushCard is cheaper than traditional banking is a stretch. The card does provide convenience in a world that requires a piece of plastic to make transactions, but its fees accrue quickly as you’re charged to spend your own money. Seems like a bad deal. The RushCard might be cheaper than the check cashing places Simmons is trying to steer people away from, but is certainly not the optimal way of managing funds. As a masterful businessman, Simmons must know this.
The RushCard does fill a niche between true financial empowerment and the worst elements of the money management business — which check cashing firms represent. But why give the black community an option that is only two steps above the worst? Russell Simmons recognized an opportunity to create an empowering system for helping the financially undeserved. Instead he has provided another sub-optimal vehicle targeted towards an urban audience that needs financial education to build its confidence.
The RushCard is a mediocre tool that exploits fear-based ignorance. While Unirush Financial Services might not be conducting business in a way that is technically illegal, promoting the RushCard as a means of sound money management reeks of the unethical.
(Network Journal) — The trend of pre-paid credit cards targeted toward African-American consumers seems to be on the rise and made all the more alluring through alignment with notable personalities to the demographic such as lifestyle mogul Russell Simmons and radio personality Tom Joyner. Financial institutions seem to identify the Black segment as one of large opportunity due to recent statistics released by the Federal Deposit Insurance Corporation which states that 25% of all U.S. households are unbanked or underbanked. Of the households surveyed, 7.7 percent were unbanked, which translates nationally to 9 million households – approximately 17 million adults. An additional 17.9 percent – or 21 million households nationally (approximately 43 million adults) – were found to be underbanked.
(Washington Post) — Uncle Sam wants you to have a prepaid card, and he’s not the only one.Â¶ The Treasury Department is sending letters to 600,000 people this week encouraging them to sign up to receive their tax return on a new government-issued prepaid card as part of a pilot program to help those with limited access to bank accounts. Â¶ On the other end of the spectrum, reality TV star Kim Kardashian’s namesake prepaid card failed just weeks after its launch. She and her sisters were shamed into bowing out because the card was riddled with high fees. Â¶ Can these really be the same products?
(AP) — Celebrities endorsing financial services can be a touchy subject. But hip-hop mogul Russell Simmons says he introduced his prepaid RushCard in 2003 to serve those locked out of banking services. On Tuesday, syndicated radio host Tom Joyner ventured into the prepaid market as well with his Reach card. Joyner says the card will resonate with his predominantly African American listeners, who are more likely to avoid traditional bank accounts. Prepaid cards in general have been criticized for the fees they charge. The industry is still relatively young and there’s great variance in the fees users will encounter.
(Wall Street Journal) — Big banks may soon start pushing a different type of plastic to their customers. Financial institutions such as U.S. Bancorp, Wells Fargo & Co. and Bank of America Corp. are exploring prepaid cards as a way to make up revenue that will likely be lost from federal restrictions on debit cards. That is because prepaid cards, which are preloaded with funds and used like debit cards, are exempt from restrictions in the Dodd-Frank financial-overhaul bill. The law, enacted earlier this year, is expected to reduce significantly the transaction fees that banks collect from merchants with each swipe of a debit card, known as interchange fees. The Federal Reserve hasn’t yet provided details on the new debit-card restrictions, but a survey released by CardHub.com last month estimated banks could lose as much as $9 billion of the $22.8 billion collected each year in interchange fees.