Justin Bieber Prepaid Card Evaluation
Justin Bieber’s schedule has undoubtedly been jam packed ever since music exec Scooter Braun discovered him on a YouTube video in 2008 while looking for footage of another singer. But the past few weeks have been especially eventful for the 18-year-old singing sensation, who not only had to deal with highly publicized murder/castration threats while in the middle of an international stadium tour, but also performed at the Victoria’s Secret Fashion Show, got “snubbed” with no Grammy nominations, and became the most recent celebrity to sign on as a prepaid card endorser.
While a lot of folks are inevitably more interested in the salacious details of the first few events mentioned above, there are two things in particular that we at WalletHub want to know: 1) What qualifies Bieber to hawk financial products; and 2) Is the card being issued by the company he’s endorsing any good?
We addressed the first question in our post on the value of celebrity endorsers, so let’s go right ahead and see what the card that’s received a tacit endorser by Bieber has to offer. To give you the necessary background, Bieber struck a “strategic partnership” with a company called BillMyParents on Nov. 28 to serve as a brand ambassador. BillMyParents’ primary offering is currently its SpendSmart Teen Prepaid Card. The objective “is to help families teach responsible spending habits,” BillMyParents Chairman and CEO Mike McCoy said in a press release announcing the deal. “By combining our new teen prepaid debit card with Justin's vast reach and [BillMyParents’] financial educational materials, we can empower countless families with teens to think about responsible spending in a new and better way."
In order to gauge whether that’s realistic or just all talk, we identified the Cost, Pros, Cons, and Marketing Fluff related to this product.
While prepaid cards have three primary uses (i.e. alternative checking account, replacement check cashing tool, and financial literacy teaching tool), the SpendSmart Card – which will undoubtedly become known as Justin Bieber’s prepaid card in no time – is obviously targeted to young people. We will therefore only evaluate its suitability for the latter purpose, and we’ll do so using the same methodology as our 2012 Prepaid Card Report.
- Financial Literacy Teaching Tool: 2 ATM withdrawals at $3.83 (the card’s $1.50 ATM withdrawal fee + the average ATM owner surcharge of $2.33) + $3.95 monthly fee + $0.75 reload fee (you can load money to the card for free with a recurring ACH transaction, but from a financial literacy standpoint, parents might want to load different amounts based on performance) + 8 purchases made at $0.00 each = $12.36. The card is therefore much more expensive for the average user than the best prepaid cards for this purpose, the Kaiku Prepaid Card – which would cost $1.95 per month under the above scenario – and The Approved Card from Suze Orman – which would cost $3.00 per month.
The card’s cost will obviously fluctuate based on how exactly you use it, but the above scenario – designed to mimic use by an average consumer – show that it’s certainly not one of the best cards on the market.
- Mobile Tracking & Account Control Features: Most prepaid cards offer online account management, which is one of the main reasons to use them for teaching young people the tenets of responsible money management. However, the SpendSmart Card takes things to the next level, enabling parents to receive text message notifications whenever their children make purchases, showing where the transactions took place, how much they’re for, and what the remaining balance on the card is. Parents can also lock their children’s cards and load funds remotely.
- Ability to Load Emergency Funds: The SpendSmart Card allows parents to immediately load funds to their kids’ accounts from anywhere, thereby ensuring they won’t get marooned without any money. That’s a helpful safety feature, considering the customer demographic.
- Fraud Protection: The SpendSmart website states that, “The prepaid BMP SpendSmart Card is the safest option for protecting you both from identity theft when items are purchased in a retail or online environment. It’s the smartest way to protect you and your teen from fraud.” That’s simply misleading in the sense that the card doesn’t offer any features that set it apart from any other MasterCard.We asked BillMyParents about this, and they said, “We are not saying that this is unique to us or other MC products, but this is something you do not get with cash or a debit/bank account.” That’s certainly true, but consumers also need to realize that the SpendSmart Prepaid Card doesn’t bring anything unique to the table in terms of plastic providing fraud protection.
- Ability for Multiple People to Load Money: SpendSmart marketing emphasizes the fact that friends and family can load money to your card. Even if it is unique for individuals who aren’t authorized account users to be able to directly load money to the SpendSmart Card, that’s not too big of a deal since most friends and family members would choose to give such a “gift” to the person directly. People say gift cards are impersonal, after all, so you can imagine how they feel about what amounts to a wire transfer.
- BillMyParents Brand Name: If the goal is to promote financial responsibility, one could certainly make the argument that the “BillMyParents” brand name sends the wrong message. Young people should be preparing for financial independence when using a prepaid card, not being led to believe their parents have the tab or will bail them out if they need money.Again, we asked BillMyParents about the message sent by the company’s name, and their response was: “We understand why the company name can initially be taken the wrong way. The name is meant to be tongue-in-cheek and actually embodies the attitudes we are trying to help families change (entitlement to spending money and thoughtless spending habits).” In other words, it appears they’re trying to be ironic.
- Monthly Fee: You can find a prepaid card with a lower monthly fee to use as a financial teaching tool.
- ATM Fees: The fact that you’ll have to shell out a few bucks every time you want to use an ATM means this card will either get young people in the bad habit of paying for unnecessary charges or prevent them from practicing an important type of transaction.
- Lack of Online Bill Pay: The absence of this feature means that as teens progress in their financial literacy education, they cannot learn how to pay bills that do not accept card payments, which would more closely mimic checking account use.
- Inability to Load Checks Directly: As teens start getting summer jobs and earning paychecks, it’s important that they are able to load their own funds and avoid simply “billing their parents.” The SpendSmart Card prevents them from loading checks directly, which means they’ll have to get a checking account, go to a check cashing store, or hit up their parents for money to put on their cards.
While we commend BillMyParents and Justin Bieber for teaming up to promote financial literacy among young people, we only wish they had a better product to do it with. The SpendSmart Card is a niche product with a middling price structure that lacks several key features. A lot of parents will undoubtedly end up getting it because their kids are drawn to the Bieber branding or because they find the mobile account maintenance features attractive. That’s unfortunate because superior offers like the Kaiku Prepaid Card, which is admittedly less flashy, provide essentially the same utility at a much lower cost. At the end of the day, the relationship between Justin Bieber and BillMyParents seems like just another case of a celebrity trying to pull a fast one and endorse a financial product not because it’s the best on the market, but rather because the endorsement deal provides the best financial terms for them.