The most dangerous part about handing a teenager a prepaid card — say, something like the plastic promoted by Justin Bieber — is that the young consumer could unwittingly end up unlocking a slew of hidden fees.
Bieber is giving lessons now on money management and talking about budgeting in a commercial for the SpendSmart Prepaid MasterCard. But never say never when it comes to the risks of going broke on little-discussed fees.
The good news is that the prepaid card field is growing, so there are far more ways to comparison shop if you're willing to read the fine print and fee schedules. Yet, this remains a product that is mostly unregulated at the federal level.
Some prepaid cards have upfront activation fees that range from $2.99 to $14.95. But many cards won't charge such fees if you get the card online. In some cases, you may have to load a minimum of $20 or so to activate the card.
Fifteen of the 24 most widely-issued prepaid cards charge a monthly fee that can range from $3 to $9.95 each month, according to a study released this month by Bankrate.com. The Bieber-backed SpendSmart card was not part of that survey, but it has a $3.95 monthly fee.
Some cards, including the Bluebird by American Express and Wal-Mart and the H&R Block Emerald Prepaid MasterCard, have no monthly fee.
For a younger consumer, the real fees could add up quickly with some services. So, before selecting any card, consider these tips:
• Before picking up a prepaid card, read the fine print either online or on the card's packaging. Will there be a fee to load money onto the card?
• The Bankrate.com survey of 24 widely-issued prepaid cards indicated that most of those prepaid cards do not charge a fee for PIN-based point-of-sale transactions. But two cards in that survey do not allow for PIN-based point-of-sale transactions. Five cards charge a fee for PIN transactions that can range from 49 cents to $2 a pop.
• Pay attention to any fees for calling customer service, paying bills, getting a paper statement, extra fees for ATM balance inquiries or even a fee for not using the card for a month or more.
• If you have direct deposit onto a prepaid card, it may be possible to avoid a monthly fee. But often there's a minimum required deposit.