Advertisement
credit & debt

Not a Fan of the Justin Bieber Prepaid Card

Janet Bodnar explains why parents shouldn't get the latest celebrity-endorsed debit card for their kids.

When Justin Bieber puts his name on a prepaid debit card, it’s time to hang on to your wallet. Other celebrities -- Suze Orman, Magic Johnson, the Kardashians, to name a few -- have endorsed prepaid cards, but none with such a direct link to impressionable teens. And word is that the kid heartthrob will make full use of social media to promote the SpendSmart prepaid card to his millions of Twitter followers and Facebook fans.

The card is affiliated with a Web site called BillMyParents.com, aptly named in this case because parents will no doubt end up footing the bill. Prepaid cards are notorious for tacking on a long list of fees, and Bieber’s is no exception. For starters, the SpendSmart card has a monthly fee of $3.95. It costs $2.95 each time you load the card from a debit or credit card, or 75 cents when you load it from a checking or savings account. At the ATM, it costs 50 cents for a balance inquiry and $1.50 per withdrawal. There’s a replacement fee of $7.95. And if you don’t use the card for as little as 90 days, you’ll pay a $3 inactivity charge.

Advertisement - Article continues below

Prepaid cards are becoming popular with adults as a way to control their spending or opt out of the banking system (see Prepaid Cards Flooding the Market). For adults who want to use a prepaid card, we at Kiplinger like the Bluebird card from Wal-Mart and American Express. You can pay your bills online and deposit checks with an app on your iPhone or Android smart phone, and the card has no activation or monthly maintenance fees. Plus, you can authorize up to four users with customized spending limits.

Advertisement
Advertisement - Article continues below

Not a fan. But I have never been a fan of prepaid cards for kids (see Why I Don't Like Prepaid Cards for Kids. Sponsors of these cards claim the high-minded purpose of teaching kids to spend responsibly; Bieber will reportedly produce a number of videos touting this theme. Call me a skeptic, but I’ve always thought the real purpose is to make it easier for kids to spend money -- on Justin Bieber paraphernalia, perhaps? -- and for parents to pick up the tab.

Advertisement - Article continues below

I always tell parents that when you are dealing with children and their finances, you need to think like a kid. Adults may consider a prepaid card to be a convenient alternative to a credit or debit card, but kids think of it as a direct line to Mom and Dad’s wallet. This point was brought home to me a few years ago, when I received a question from a young woman asking about another prepaid card aimed at kids: “Where can I get that card that my parents can top up when it runs out of money?” she asked.

A better way. Over the years, some parents have persuaded me that prepaid cards can be useful in specific situations (assuming you aren’t eaten alive by fees), such as if a teen is managing his or her own earnings from a part-time or summer job, a student is going out of town on a class trip or studying abroad, or a college student chronically overdraws his or her checking account.

But overall, I think kids are better off with a regular checking account and a debit card, possibly from a credit union or community bank that charges reasonable fees (if any) -- see How to Teach Kids to Handle Credit Cards. And establishing a relationship with a financial institution can be beneficial when your child is in the market for other services -- for example, a credit card. (Contrary to what you may have heard, prepaid cards do not help build credit.)

The best way to teach kids good financial habits is simply to make them responsible for managing their own money and making their own choices -- and you don’t need Justin Bieber’s help to do that.

Follow Janet's updates at Twitter.com/JanetBodnar.

Advertisement

Most Popular

What Are the Income Tax Brackets for 2020 vs. 2019?
tax brackets

What Are the Income Tax Brackets for 2020 vs. 2019?

The IRS unveiled the 2020 tax brackets, and it's never too early to start planning to minimize your future tax bill.
June 20, 2020
65 Best Dividend Stocks You Can Count On
stocks

65 Best Dividend Stocks You Can Count On

These 65 Dividend Aristocrats are an elite group of dividend stocks that have reliably increased their annual payouts every year for at least a quarte…
July 8, 2020
Find a Great Place to Retire
happy retirement

Find a Great Place to Retire

Our cities provide plenty of space to spread out without skimping on health care or other amenities.
July 2, 2020

Recommended

52 Super Deals and Discounts for 2020
spending

52 Super Deals and Discounts for 2020

With a special nod to those of you spending more time at home, we found dozens of deals and discounts, plus ways to save (or make) money.
June 6, 2020
Banks Canceling Credit Cards, Cutting Limits
credit & debt

Banks Canceling Credit Cards, Cutting Limits

If you haven’t used a card in awhile, make a small purchase with it to keep it open. It’s good for your credit score.
June 4, 2020
Milliennials Face Their Second Recession
credit & debt

Milliennials Face Their Second Recession

Forty percent of millennials say the pandemic will likely cause them to delay payments on their debts. Does that include you? Time to take action.
June 4, 2020
When Savings Bonds Make Sense
credit & debt

When Savings Bonds Make Sense

Series I savings bonds are safe options, but don’t go all in.
June 3, 2020