American Express (Stock Quote: AXP) has been getting increasingly aggressive about targeting younger consumers with prepaid credit card deals. Now, they’re aiming at the teenybopper set with a new card called PASS. It’s being offered to teens and their families at $3.95 a month, and it has some potentially helpful — and not so helpful — aspects to the deal.
Amex is heading into the youth credit card market facing some stiff headwinds. While the card giant does have a prepaid credit card for college students (called ZYNC), studies indicate that younger cardholders are having a tough time managing those cards.
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According to an April 2009 study by Sallie Mae entitled "How Undergraduate Students Use Credit Cards," the average balance for student cardholders was $3,173, the highest point ever tracked by Sallie Mae. The median balance for college card customers was $1,645 — up from $946 in 2004. And 21% of student cardholders had balances between $3,000 and $7,000.
Against that backdrop, parents may well wonder if their teens actually need a credit card — even a prepaid one. But that’s not stopping American Express, who is acknowledging the potential anxiety parents may have about their teenage children getting a credit card.
For starters, teens may not fully grasp the nature of credit card usage — that any funds extracted from the card to pay for purchases will actually have to be repaid. Then there is the safety issue. Any parent who has spent hours looking for a teen’s cell phone understands that a credit card can just as easily be lost or stolen.
But Amex promises full parental controls that should mitigate overspending and allow the card to be disabled for access if lost or stolen.