Kardashian Kard killed - but prepaid cards set to take off

By Peter Andrew

Call me old-fashioned (no, really--everyone else does), but I know next to nothing about the Kardashian sisters. However, even with the tiny amount of knowledge I have, I struggle to picture a family breakfast scene in which Kim, licking maple syrup from her perfectly manicured fingers, glances up from her copy of The Wall Street Journal, and remarks to Khloe and Kourtney: "It says here that analysts are forecasting explosive growth for the prepaid card market. I think we should establish an aggressive presence in that sector."

No, I suspect that some Svengali-like figure on the sisters' business management team persuaded the family that launching the Kardashian Kard was a good idea. And it might be fairer to blame him or her than the girls for the fact that the Kard is likely to end up entering the record books as one of the shortest-lived products in the history of financial services.

Kard killer

The Kard was withdrawn Nov. 30, just three weeks after its glitzy launch. And its cause of death was the sheer weight of negative publicity that followed a blistering attack on it by Connecticut Attorney General Richard Blumenthal. He's quoted as referring to the product's "pernicious and predatory fees," saying, "Among the prepaid debit cards now on the market, the Kardashian Kard is particularly troubling because of its high fees combined with its appeal to financially unsophisticated young adult Kardashian fans. Keeping up with the Kardashians is impossible using these cards."

Prepaid cards aren't all the same

Factually, he was correct. The product was reportedly targeted at those 13 years old and up, although you had to be 18 to apply, so presumably young teenagers would need to wield pester power to get their parents to obtain one for them.

It's true that the fees were fairly high. Even if you didn't use the Kard at all, it would have cost you $59.95 during the first six months you held it, and then $7.95 a month after that. Then there was $2.50 for every ATM withdrawal, $1.50 to access help from the call center, and $2 for each bill payment, to name just a few other charges.

Sounds a lot? Not really, at least if you compare those fees to the amounts charged by some of the Kard's competitors. When the Consumers Union looked at 19 prepaid cards back in September it found that:

• "Activation" fees were levied on 12 cards, and ranged from $3.00 to $39.95
• Sixteen charged monthly fees ranging from $2.95 to $9.95 ($9.95 a month adds up to $119.40 a year, whether you use the card or not)
• ATM withdrawal fees, which were charged by all issuers, started at $0.99, and topped out at $2.50
• Eighteen cards charged between $0.45 and $1.00 for simple ATM balance inquiries

Picking a good prepaid card

That list of fees goes on and on, and the variations between the amounts different cards charged for each ranged from the significant to the enormous. Last year, The New York Times spoke to a Brooklyn man who was given a list of 24 different fees that could be applied to his prepaid card, and to a Florida resident who'd been charged $2.95 for a declined ATM transaction when he mistakenly keyed in the wrong PIN. When the latter contacted the call center to complain, he was stiffed a further $1.95 for the privilege.

The trick when choosing a prepaid debit card is the same as when picking any credit card: think about how you're likely to use the product, and then select the one with the fee structure that best matches your particular needs. Sorry, but that does involve reading quite a bit of small print, though the amount you save could more than justify the time you spend.

One card that should probably be on your short list is the Walmart MoneyCard, which--while somewhat lacking in Kardashian-style glamour--is widely cited as an exceptionally low-cost product.

Prepaid card use set to explode?

The Federal Reserve published a study Dec. 8 that looked at the different ways in which consumers make payments. And it said: "Prepaid card transactions�� represented the fastest growing payment type, increasing 21.5 percent annually from 2006 to 2009." That growth was, admittedly, from a low starting point, but a couple of days before the Fed's study became required reading at the Kardashian family breakfast table, The Wall Street Journal revealed that prepaid cards are about to receive a massive boost.

Apparently, recent legislation that could cap the fees banks receive from merchants every time one of their cards is swiped does not apply to prepaid cards. So now many of the big banks are developing their own prepaid products. Don't hold your breath, but it's just possible that the new competition these provide could drive down prepaid card fees, and force some of the worst gougers out of the market.

Who knows? Maybe even Kim, Khloe and Kourtney could be tempted to get one.