What a difference a month makes. Prior to the November 10 launch of their prepaid debit “Kard,” the Kardashian sisters (Kim, Khloe and Kourtney) were bursting with excitement about their latest business deal with Mobile Resource Card and MasterCard. “There are so many more amazing features to this card and I’m so excited to share it with you guys,” Kim wrote on her blog. “I think you guys are going to love it!”
Attorney General of Connecticut Richard Blumenthal had more suspicions than love, and opened an investigation to determine if the Kardashian Kard violates consumer protection laws. In a letter sent to the University National Bank, Blumenthal charged that the “egregious fees [for the Kard] raise considerable ethical, and perhaps legal, questions under Connecticut’s consumer laws. The new federal Dodd-Frank Act also prohibits ‘abusive’ financial products being sold to consumers.”
In the wake of the controversy, which included financial gurus like Suze Orman sounding off on the potential negative impact of the card, the socialites released a notice of termination to the backers of the Kard last night (November 29, 2010). “[The Kardashians] have been successful… because they are recognized as honest, ethical and fun-loving individuals who are kind and caring to others,” the Kardashians’ lawyer, Dennis A. Roach, wrote in a statement. “Unfortunately, the negative spotlight turned on the Kardashians as a result of the Attorney General’s comments and actions threatens everything for which they have worked.”
At the root of the problem were a host of hidden fees and extra charges that would likely cause more harm than good to cardholders. Not only did it cost a reported $99.95 just to own the Kardashian Kard, there were monthly fees totaling $7.95, as well as a $1.50 surcharge every time money is added to the account and a $25 replacement charge for lost or stolen cards.
Targeting those with poor credit histories or none at all, prepaid debit cards may sound like a godsend, but the compounding charges can be crippling. Secured cards, which require a cash collateral deposit, are generally better options for those unable to secure an account with a reputable financial institution or trying to rebuild their credit score following a bankruptcy claim, but they have just as many financial pitfalls. “As a consumer you really need to do an investigation into the charges—membership fees, annual fees and there are even charges for replenishing the card, so you get charged money to put money on the card,” warns John Simons, Black Enterprise’s Editorial Director & Senior Personal Finance Editor. “In this economy, banks are trying to get money any way they can.”
Before making the decision to sign up for a secured or prepaid card, which are disproportionately marketed to our communities, be sure to ask yourself these 10 questions first. Bank smart, BE smarter.
Read more on how to avoid financial pitfalls…