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Update: Kardashian Kard kaput!
It’s one thing to be hip and cool, but don’t let the cool thing of the moment lead you to make bad money decisions.
That’s the message behind a warning issued today by a leading consumer advocacy group about the Kardashian Kard, a new prepaid debit card being marketed to teens and young adults. As its name implies, the card is backed by the Kardashian sisters, Kim, Kourtney and Khloe, the stars of the E! cable network reality series about their lavish lifestyles, “Keeping up with the Kardashians.”
As far as I can tell, their only talent is being rich, fashionable and hip. Their late father, attorney Robert Kardashian, gained national fame as one of the O.J. Simpson defense team attorneys in 1995.
Last week, when the Kardashian trio announced they were lending their names and celebrity to a new prepaid debit card, the general reaction from smart money watchers was: Keep away.
|Khloe, Kim and Kourtney Kardashian, shown here hawking
some other product.
Now this from Consumers Union, the nonprofit consumer group that owns Consumer Reports magazine:
“There’s nothing glamorous about a prepaid card that comes with a bunch of hidden fees and other gotchas,” Suzanne Martindale, a policy associate for the consumer group, said in a statement. “Don’t try keeping up with the Kardashians by falling for this celebrity-hyped prepaid card. There are more affordable and safer options to managing your money and paying with plastic.”
The Kardashian Kard website features a picture of an iPhone-toting, sunglass-wearing Kardashian-resembling female (not sure if it’s one of the K girls because only half her face is showing). The iPhone has a photo of the actual sisters emblazoned on a debit card. “Take us with you. Everywhere,” is the tagline on the Web page.
Maybe they should add another line: “Only if you want to be fleeced.”
Check out the fees and you’ll see why:
The card itself costs $59.95 for six months; after that, it’s $7.95 a month. If you sign up for a year, they charge $99.95 for the card with the $7.95-a-month fee after the first year.
Other fees: $1.50 for domestic ATM withdrawals (plus whatever the ATM network charges to use their terminal), $1 for a domestic ATM inquiry or decline. Add $1 to both of those if it’s international. Purchases that are declined at the store or point of sale are charged $1 both domestically and internationally. Loading the card using money from another debit or credit card costs $1 plus 2.5 percent of the amount being loaded. Calling the service center costs $1.50.
Daily purchase amounts on the card cannot exceed $500, so it’s not for big-ticket purchases.
The website clearly states that you must be at least 18 or older to apply for the card, which is a MasterCard-branded card issued through University National Bank in St. Paul, Minn.
The Kardashians aren’t the first to attempt to cash in on their celebrity by lending their names to co-branded payment cards. Hip-hop singer Usher, wrestler Hulk Hogan, entertainers Elvis Presley, Johnny Cash and KISS and teen star Hillary Duff have all had specialty cards featuring their images. Several have flopped and are now defunct. See our article on why celebrity cards fail.
The Kardashians aren’t exactly models of good financial practices. Kim and her sisters were embroiled in a lawsuit filed by R&B singer Brandy Norwood’s mother over alleged misuse of the mother’s credit card. The sisters allegedly ran up $120,000 in credit card purchases — although sister Kim had only been authorized to make one purchase. The suit, originally filed in February 2008 was later dismissed by the courts.
High fees = longer card retention?
Some card industry observers say the high upfront fees charged by the Kardashian Kard may encourage users to keep the cards in their wallets longer, since prepaid card owners are typically fickle users who discard cards as easily as they acquire them. The $60 and $100 upfront fees may make them stick around and use the cards longer, experts say.
A spokeswoman for the Minnesota bank issuing the card told PaymentsSource (paid subscription) that its target audience will likely pay the fees to get the card: “This is not the least-expensive option in the market; we acknowledge that. But the program manager and the Kardashians felt that their target market, young professionals, would be accepting of these fees,” Jeannie Bauer told PaymentsSource in an e-mail.
Michael McCauley, a Consumers Union spokesman, said the card caught their attention because of its potential to lure impressionable teens.
“Because the Kardashian sisters are so high-profile and because the card was being marketed specifically to teens it caused some concern to us,” he said in a telephone interview. “This one has a particularly high fee to get started and then a high monthly fee. Otherwise, it has some of the same fees that other cards have.”
It’s not the first payment card to trigger Consumers Union warning bells. In June 2010, the group issued an alert about a card — again marketed to teens — that featured Twilight movie characters: “Twilight prepaid cards will suck you dry.”
Another prepaid card — marketed to Mexican immigrants — also drew criticism for its fees. “With that card we were concerned about it because the fees were very high, particularly for money transfers to Mexico. It was being marketed to a particularly vulnerable community,” McCauley said.
The fine print
I spent time going through the Kardashian card’s terms and conditions, all the while thinking their target audience of “young professionals” likely wouldn’t or couldn’t wade through all that fine print.
In the middle of the terms was this zinger: “Some fees and charges may be for services that you request that are not included in this disclosure or the schedule of Fees and Charges set forth below, but you agree to pay those fees and charges.” Translation: There may be fees for things we haven’t thought of yet, but you agree to pay those, too.
Just for kicks, I copied the agreement from the site and ran it through a readability program that CreditCards.com used to assess how difficult it was to read a credit card agreement. The readability program counts the number of complex words and sentences and determines how many years of education a person would need to fully understand the text.
The results: 14.7 years or a college reading level — way above the understanding level of average teens or even their parents. In a special report published in July 2010, we found the average credit card agreement in the United States is written on a 12th grade reading level, beyond the ability of four out of five Americans to understand what they are reading. The average adult reads at a ninth grade level.
Want out? It’ll cost you
If you’ve already signed up for the Kardashian Kard and want to cancel the account, that will cost you, too. They charge $6 to cancel the account and request the balance on the card be mailed in a check.