NEW YORK (MainStreet)—This bit of Justin Bieber banking news might make you sing, "Baby-baby-baby-oh!"
Fact: Justin Bieber’s life began in 1994 in Ontario, Canada, making him a highly sympathetic figure for those who are 19 years old and younger.
Fact: Bieber’s success as a singer and songwriter earned him the cover of Forbes in May 2012 after having netted $108 million in the preceding 24 months.
Fact: His fans are called “Beliebers.”
Fact: Spendsmartcard.com thought that this was such an extraordinary confluence of facts that they have made him the company spokesperson for a line of pre-paid debit cards.
Window dressing aside, Spendsmart’s new pre-paid debit card follows a long line of financial products aimed at ‘tweens and teens (but controlled by their parents), which comply with the Credit CARD Act of 2009 barring minors from having credit cards.
Pre-paid cards are easy to reload, their use (or misuse) will not impact you or your child’s credit score, and they’re a soft-entry for lots of minors into the hallowed halls of financial independence. Right now, you can shop for Visas, Mastercards, and American Express network cards (offered by two dozen online and brick-and-mortar banks), all with varying ATM or transaction fees.
There’s only one card, however, for which Justin Bieber shills.
And, it makes no sense whatsoever to own this card. Here’s why:
A SpendSmart pre-paid Mastercard is free to obtain provided you load it with $20 to start. The monthly fee to own this card is $3.95, and you may re-load it without charge once per month and with charges multiple times per month. Each user withdrawal of any kind will cost $1.50 in the U.S. and $2.50 anywhere else (like, say, Ontario, Canada).
If your child is particularly responsible and wants to know how much movie money she has left, it will cost you $0.50 for each ATM balance inquiry. If, on the other hand, your child is particularly forgetful, it will cost you $7.50 to replace a lost card. Finally, if your child is particularly frugal or—mysteriously—has no interest in spending money, it will also cost you. There’s a $3.00 fee for one month of inactivity.
A number of financial news and advice blogs have pointed out that pre-paid cards are a bad idea for this precise reason: fifty cents or, perhaps even $7.50, is chump change, but, pesty fees tend to add up.
What starts as a $23.95 investment in “money management lessons” can end up costing two, three, or four times as much—especially if you have to keep reloading your child’s card, if they keep frequenting the ATM, and if the card itself keeps falling out of their back pockets. If you intend on setting an example of responsibility, isn’t it rather irresponsible to deny the probability of that scenario?
So, if the goal here is to teach your children well, open a joint checking account, give them a debit card, and instruct them on the finer points of budgeting. Even Bieber agrees. “It doesn’t matter if you have $100 or $100,000, if you spend more than you have, you’ll go broke,” he notes in SpendSmart.com’s first episode of “Life Lessons.” Someone should have told him that fees will make you go broke, too.