Editorial Policy

How to Find the Best Prepaid Cards for Tweens and Teens

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By Eva Norlyk Smith, Ph.D.
November 24, 2010

Last week, the widely publicized prepaid Mastercard from the Kardashian sisters was launched amidst much hype and celebrity buzz. Unfortunately, for the Kardashians—and their fans—it was difficult to find a website actually offering the card, so filled were Google and other search engine results with finance writers and bloggers bashing the Kardashian “kard.”

Featuring the faces and names of the three celebrity sisters, the Kardashian “kard” is being marketed to the teenaged fans of the reality stars. Sounds innocent enough, so why all the bashing? Because the “kard,” perhaps not surprisingly, comes with a long line-up of hefty fees. For starters, there’s a $59.95 sign-up fee to use the card for six months (or $99.95 to use it for a year), and a $7.95 monthly fee after that (the equivalent of a $96 annual fee). The “kard” features a slew of other fees, including a $9.95 card replacement fee, a $1.50 ATM withdrawal fee, a $1 fee to check the balance at ATMs, and a $1 fee to load money onto the card other than via direct deposit from an employer or the Mobile Mone Wallet service, plus a $1.50 fee to talk to a customer service operator.

In short, parents, who get this card for their teen or tween and load a $100 monthly allowance will end up spending $8 a month and upwards in fees for the pleasure. If money is loaded once a month and the cardholders makes an average of three ATM withdrawals per month, each time checking the balance first, plus one phone call to a customer service department, the monthly fees will amount to a total of $7.95 + $9.50, for a total monthly charge of $17.45. That’s roughly $210 per year to let your kid spend a $100 monthly allowance via the “kard.” Compare that to the free debit card that comes with most checking accounts.

The Kardashian “kard” episode is a good reminder that when it comes to prepaid cards, it’s important to take a careful look under the hood, so to speak. Prepaid cards can have many virtues, particularly for parents who want to teach fiscal responsibility to their kids. Because prepaid cards don’t offer access to credit, (it’s only possible to spend the money preloaded onto the card), prepaid cards can be a great way to teach junior good plastic management habits, without the risk of excessive spending that comes with credit cards.

However, prepaid cards in the past have mainly targeted people with bad or no credit, and many come with multiple hidden—and hefty—fees. As prepaid cards are becoming more popular, competition is forcing fees down. However, there are still many bad apples in the barrel, so to speak, so it’s important to do a little digging to find a card without exorbitant fees.

The best prepaid cards feature no (or low) monthly fees and few other fees. In addition, many prepaid cards targeting teens give parents an extra degree of control of their child’s expenditures. Some prepaid cards include features that allow parents to shut the card off if the cardholder spends over a certain amount in one day, or if the balance hits zero. Some cards will even give parents the option to approve a purchase, or send a text message to let you know that your teen’s balance is dwindling.

Cards designed specifically for teens include VisaBuxx ($10 opening fee), the Obopay Prepaid Mastercard (featuring a $1.95 monthly maintenance fee), and the Current Card for Teens by Discover Card (no monthly fees). Designed with parents and kids in mind, these cards allow parents to check the balance online and automatically transfer their kids’ allowances every month.

Still, these prepaid cards are not without their own slew of ATM withdrawal fees, paper statement fees, and customer service fees. Most of these can be avoided, however, if the card is used with this in mind, and parents wanting the extra feature of being able to keep an eye on their teen’s spending may find that the charges are worth it.