Celebrity prepaid debit cards are getting really fashionable! Let me show you some of the more outrageous ones.
Amanda's Post Update 09/12/2016: WOW. Apparently others weren't keen on all the fees these trendy cards carried as well! I've gone through and updated each of the cards with new links, as well as whether or not they even still exist (most don't). I also kept the original post wording so you can take a look for yourself.
Is it just me, or is endorsing a prepaid debit card the newest Hollywood trend?
This is partly due to the fact that the 2010 swipe fee reforms (in the Dodd-Frank Wall Street Reform and Consumer Protection Act) exempted most prepaid debit cards, making them potentially more lucrative for banks than debit cards.
The other reason for celebrity endorsements is the growing popularity of this financial product among consumers. There are an estimated 60 million “unbanked” Americans who do most or all of their personal business in cash or cash alternatives (like prepaid cards).
And of course the primary reason is, it's become quite lucrative! According to the consultancy Mercatory Advisory Group, consumers loaded $70.7 billion onto prepaid cards in 2011, up from $2.7 billion in 2005. That is a Mt. Everest-high market increase that any celebrity would want to jump on.
Typical Prepaid Debit Cards
Prepaid Debit Cards are different from gift cards, regular debit cards, or secured credit cards.
Some of the advantages of using a prepaid debit card are being able to direct deposit onto the card, gaining an acceptable method of payment other than cash wherever Visa and Mastercard are accepted, little or no “overdraft fees”, and acceptance without a credit check.
Some of the downfalls include the large list of fees that are associated with using the card, as well as not gaining any sort of credit towards a credit score like you do with using other financial products (despite Suze Orman's best efforts).
Before we assess whether or not these celebrity’s cards are good or bad, it’s helpful to see what a typical prepaid debit card looks like.Before we assess whether or not these celebrity’s cards are good or bad, it’s helpful to see what a typical prepaid debit card looks like. Click To Tweet
From what I’ve seen, there are at least 14 different types of fee categories that can be assessed, including things like the cost to set up the card, fees for calling customer service, balance inquiry fees, and fees for withdrawing cash from an ATM.
As expected, there is a large range that is being charged within each of these fee categories. According to NerdWallet’s analysis of 82 Prepaid Debit Cards, $39 is the low range and $420 is the high range of total annual fees consumers can expect to pay for typical usage behavior.
Ouch. It doesn't pay to be unbanked!
Celebrity Prepaid Debit Cards
So how do the flashy, celebrity cards stack up to a typical prepaid debit card?
Here's a list of the celebrity prepaid debit cards I could find, loosely ordered from costliest to cheapest (note that some are co-branded/partnerships while others are endorsements).
- Lil Wayne’s YM Debit Card (UPDATE 09/12/2016: No Longer Offered): Young Money Entertainment, which is rapper Lil Wayne’s record label, launched a prepaid card with Discover Financial Services in 2011. This card is unique in that it is a spend analyzer that helps cardholders budget funds, as well as gives prescription drug and shopping discounts in the form of cash back. Hopefully the cash back will offset the purchase price fee of $6.95, $4.95 reload fee, $5.95 replacement card fee, ATM withdrawal fee of $2.00 and $3.95 monthly maintenance fee. An ATM withdrawal costs $2. Approximate cost per year with typical usage behavior is $379 per Nerdwallet’s analysis.
- George Lopez and the Mango Prepaid Card (UPDATE 09/12/2016: For the latest fees, check this out): You can recoup some of the costs from this card by opening up a Mango savings account with 6% APY (up to $5,000), an option open to cardholders who use direct deposit. You also receive a $20 bonus for enrolling in direct deposit. There is a monthly fee of $5.00 (reimbursed if you load at least $500 per month), $2 ATM withdrawal fee, $0.50 Balance Inquiry at ATM, IVR, and Customer Service fee, $0.50 mobile transfer fee, $10 account closure with check fee, and $35 account termination fee (for fraud issues). Approximate cost per year with typical usage behavior is $230 per Nerdwallet's analysis.
- Earvin “Magic” Johnson’s MAGIC Card (UPDATE 09/12/2016: No Longer Offered): Partnering with California-based One West Bank in 2012, Magic Johnson offers a card with one free customer service call per month (then $2 per call thereafter), a $4.95 fee to open, a $4.95 monthly fee, a $0.50 cent balance inquiry fee, a $4.95 replacement fee, 2 free out-of-network ATM withdrawals per month (then $2.50 each thereafter), and a $4.95 fee if you add cash at a retailer (POS). Approximate cost per year with typical usage behavior is $184 per Nerdwallet’s analysis.
- Kimora Lee Simmons’ KLS RushCard (UPDATE 09/12/2016: check out here for fees): Kimora and Visa have partnered together to offer the KLS RushCard, which will cost you a $14.95 one-time fee just to buy it (and yes, you are paying for the KLS brand; you can get the regular RushCard for a $3.95 one-time fee). Other fees include a $5.95/$7.95 monthly fee with/without direct deposit, $0.50 ATM Balance Inquiry fee, $2.50 ATM Withdrawal fee, and a $0.99 card-to-card transfer fee.
- Pawn Stars’ Gold & Silver Pawn Shop Card (UPDATE 09/12/2016: No Longer Offered): The Pawn Stars partnered with Redwood Hills Financial Group to launch a card in 2011 featuring Rick “The Spotter” Harrison, Richard “Old Man” Harrison, Corey “Big Hoss” Harrison and Austin “Chumlee” Russell. If you sign up for direct deposit and deposit at least $2,000 per month, you can qualify for a monthly $10 credit. There is a $9.95 monthly maintenance fee, a $1.00 purchase fee (if you use a PIN), a $3.50 ATM withdrawal fee, a $0.50 ATM Balance Inquiry fee, a $15.95 Account closure with Check Fee, a $25.00 Card/Account Reactivation Fee, a $2.00 fee for customer service questions “when the answers are available online”, and a $9.95 card replacement fee.
- Selena’s Visa Prepaid Card (UPDATE 09/12/2016: No Longer Offered): Launched in 2012, Selena’s card has a one-time $4.95 fee, a $5 monthly fee, a $2 ATM withdrawal fee, a $1.00 ATM Balance inquiry fee, a $7.95 account closing fee with check, a $2 live customer support fee, a $5.95 replacement fee, a $0.10 card-to-card transfer fee and a one-time $4.95 fee for purchasing each companion card. Companion cards will have a maintenance fee of $1.00 per month.
- Suze Orman and The Approved Card (UPDATE 09/12/2016: No Longer Offered): Launched in 2012, this card is unique in that Suze is working with credit reporting agency TransUnion to create a new kind of credit score based on user’s spending habits. TransUnion ultimately agreed to gather spending data for 18 months to 24 months and will use that data to try to develop a formula that works as a way to predict whether the user is a good risk for lenders. However, there is no guarantee that this will work, or become an industry standard. There’s a $3 fee to buy it, a $3 monthly account fee to maintain it (if it’s loaded with at least $20 per month; first monthly fee is waived) and a $2 fee to speak with a customer service representative (first call each month is free). Secondary cards have no monthly fees, and Allpoint ATM fees are waived if you direct deposit to the card ($2 Allpoint ATM withdrawal fees otherwise). Finally, there is a $3.00 card replacement fee. Approximate cost per year with typical usage behavior is $180 per Nerdwallet’s analysis.
- Justin Bieber with BillMyParents’ SpendSmart Card (UPDATE 09/12/2016: No Longer Offered): This is supposed to be a parent-friendly way to encourage responsible teen spending (they market it as the card that “Can do things cash can’t”). The card gives parents text alerts when the teen spends, and allows parents the ability to lock it and/or not allow purchases at certain retailers. For these benefits there is a $3.95 monthly usage fee, a $1.50 ATM fee, a $2.95 emergency load fee, a $3.00 inactivity fee, and a $7.95 replacement fee. Bieber’s endorsement is set to start in 2013.
- Kardashian Sisters’ Mobile Resource Kard (UPDATE 09/12/2016: This card is having a whirlwind of legal trouble): Launched November 10th, 2010 (and no longer in existence, partially due to its $7.95 monthly maintenance fees) this card came with a free Mobile Money account. There was also an initial load fee of $5.00.
As long as banks do not charge exorbitant fees for checking accounts, I don’t think I will ever sign up for a prepaid debit card.
This doesn’t mean that they don’t have purposes, such as a means to give family members money without giving them free reign to your checking account or credit line. However, I think the fees associated with these cards are a bit high (especially with the celebrity cards).
If you are ever in the market for a prepaid debit card, please search for one that does not have celebrity endorsement attached to it. Also, be on the lookout for future legislation that will hopefully be addressing and putting a cap on all of these usage (and even non-usage) fees.