If you chose Magic Johnson in the “who will be the next celebrity to offer a prepaid card” poll, congratulations because you’ve won. Johnson, an NBA Hall of Famer and renowned entrepreneur, on Tuesday announced the launch of the MAGIC Prepaid MasterCard, joining the likes of Lil Wayne, George Lopez, and Suze Orman as celebrity prepaid card endorsers.
Given that consumers will be faced with the increasingly common challenge of determining whether the Magic Card’s appeal is based on celebrity branding or truly competitive terms, we at WalletHub decided to evaluate this new card by comparing it to some of the best prepaid card offers on the market.
As you know, prepaid cards have three different applications: 1) checking account alternative; 2) financial literacy teaching tool; and 3) check cashing alternative. The Green Dot Prepaid Card, The Approved Card from Suze Orman, and the Chase Liquid Card are the best for these purposes, respectively, according to WalletHub’s 2012 Prepaid Card Report. The following analysis of the MAGIC Card – which uses the same methodology as the Report and is accompanied by quotes from WalletHub.com CEO Odysseas Papadimitriou – will begin with a direct comparison to these products.
Cost
- Checking Account Alternative: The MAGIC Card is not suitable as an alternative checking account given that it does not offer online bill pay. People using the card in lieu of a traditional checking account would therefore be unable to pay billers who do not accept plastic. The best card for an alternative checking account is the GreenDot Gold Prepaid Visa Card, as it is free to use when you load at least $1,000 per month and withdraw cash from in-network ATMs.
- Financial Literacy Teaching Tool: When used by parents to provide a child’s allowance, the MAGIC Card would cost $9.61 per month, making it a more expensive option than The Approved Card from Suze Orman, which would cost $3.00 per month.
- Check Cashing Alternative: The MAGIC Card is not suitable as an alternative check cashing tool given that you cannot load checks directly onto it. One would have to first cash their check at a check cashing store and then pay to load funds using a MoneyPak. The best card for an alternative check cashing tool is the Chase Liquid Card.
Odysseas Papadimitriou (OP): “By all accounts, Magic Johnson designed the MAGIC Prepaid MasterCard to meet the needs of the unbanked, especially those who’ve never before had access to plastic. While that’s certainly commendable, every prepaid card on the market plays this role, and some do it better than others. Ultimately, the MAGIC Card missed the mark in addressing the main needs of their target demographic, other than the basic need to have plastic in their pockets. For instance, there’s no reason for someone who doesn’t have access to direct deposit to open a prepaid card if they’re just going to have to pay to cash their checks and pay again to load money onto their card.”
Pros
- 2 Free ATM Withdrawals: The MAGIC Card does not assess fees for the first two withdrawals that cardholders make each month, which will save them up to $5 per month. However, unless cardholders withdraw cash at a OneWest Bank branch, they’ll have to pay an ATM owner surcharge.
- No Purchase Fees: Many prepaid cards charge fees for each PIN and Signature purchase that a cardholder makes. As you might expect, these costs can add up quickly, which makes it very beneficial that the MAGIC Card does not charge them.
OP: “There are certainly positive aspects to the MAGIC Card, but unfortunately there’s not much that makes the card stand out in the prepaid card space. While a lot of cards do charge for all ATM withdrawals and purchases, many do not. In other words, the MAGIC Card might get lost in the crowd.”
Marketing Fluff
- Magic Mojo: The MAGIC Card has partnered with PiggyMojo.com, a company that directs consumers to text them whenever they make decisions that result in savings (e.g. packing a lunch instead of eating out) in order to track their progress toward savings goals. While you cannot sign up for this service without having the MAGIC Card or being a customer of one of Piggy Mojo’s other corporate partners, the service doesn’t sound all that beneficial to begin with.
- That’s It: To the MAGIC CARD’s credit, there isn’t much fluff in its marketing copy. This is a very refreshing follow-up to the likes of The Approved Card from Suze Orman, which has created a lot of confusion and has even led many consumers to mistakenly believe they can build credit via card use.
Cons
- Fixed Costs: The Magic Card charges a $4.95 activation fee and a $4.95 monthly fee, neither of which consumers can avoid by signing up for direct deposit or loading a certain amount per month, as is the case with numerous other prepaid cards.
- Small ATM Network: MAGIC cardholders can only make surcharge-free withdrawals at OneWest Bank’s 77 branches in Southern California. This ATM network pales in comparison to the 22,000 locations offered by GreenDot, for example.
- Customer Service Fees: While cardholders are entitled to one free live customer service call each month, they must pay $2 per call thereafter. Consumers should never have to pay to seek assistance managing their accounts.
OP: “At the end of the day, cost and convenience, not branding, should be a prospective prepaid card user’s biggest concerns. The MAGIC Card leaves something to be desired on both fronts. Cardholders will only be able to minimize fees so far, especially since the vast majority will not have access to in-network ATMs. No one likes to get charged to access their own money, especially when there’s a fee from both one’s card issuer and the owner of the ATM.”
Overall
OP: "Ultimately, it's clear that Magic Johnson shot and missed on his new prepaid card. You just can't escape the fact that a successful prepaid card should make things easier for those using it while reducing their costs. Though the MAGIC Card puts a piece of plastic in one’s pocket, it doesn't offer much else, and for that convenience, the price tag is just too high. Cardholders are asked to pay at least $60 per year for a card that doesn’t necessarily lower their other financial costs. Whether you use it as a replacement checking account, financial literacy teaching tool, or alternative means of cashing a check you're going to find yourself not only racking up fees, but also missing key features, such as online bill pay, the ability to load a check directly, and a nationwide network of free ATMs. Most consumers will find that other cards better meet their needs."
