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Predatory Pre-Paid Debit Cards

The Kardashian Sisters kiss their association with predatory lending goodbye. Image from the Associated Press.

 

A debit card that you can load with your own cash sounds like a great idea.  None of the hassle of applying for credit, and no minimum amount that a bank requires to open a checking account.    But the new line of re-loadable cards aimed at teenagers and emblazoned with pop culture touchstones like the stars of Twlight are actually great vehicles for the companies that own them to load them up with a multitude of fees for their use.

The fees are so egregious that the Kardashian sisters, who had a deal for their images to be used on some of the cards, backed out of the deal so that they wouldn’t get negative press.  An article on NPR describes the turn of events and details the fees on the cards:

“Just to buy the card and use it costs $59.95 for six months, or $99.95 for 12 months. That does not include any money on the card. The person buying the card must add money onto it.

The initial feels were just the start. After those six or 12 months are up, it costs $7.95 a month to keep using the card. Users have to pay $1.50 to withdraw cash from an ATM, and $1 to check their balance. Talking to a customer representative on the phone costs $1.50 for each call, and canceling the card costs $6.

Losing the card results in a charge of $9.95. If the loss is reported within two days, then losses are limited to $50. But if the loss or theft is not reported, and the issuer believes the user knew it was lost or stolen, then losses could be as high as $500.” – Associated Press

A further story on the radio show Marketplace interviews the Connecticut Attorney General, Richard Blumenthal, who is investigating the companies and what he calls their predatory lending practices.  In the interview, Blumenthal notes that there’s an

“almost endless series of rates that swallow the value of the card even before it can be used. In fact, anybody using this prepaid debit card really loses before they use it.”

However, according to some of the comments on that story, there are some of these types of pre-loaded debit cards that don’t have as many fees… so, as always, read the fine print when it comes to money matters. 

Or, even better, you could take control of your personal finance by reading some of the great non-fiction books on the subject in the teen section of your library:

  Smart Money: How to Manage Your Cash / Danielle Denega

 

 

 

 

 

 

  The Complete Guide to Personal Finance for Teenagers and College Students by Tamsen Butler

 

 

 

 

 

  I’m Broke: The Money Handbook by Liam Croke

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