If Justin Bieber endorses a product, will teens buy it or convince their parents to get it for them? BillMyParents, a financial services company focused on teens, is banking on it. They've signed a deal with the pop star to endorse a new prepaid debit card to his legions of loyal fans.
With 50 million Facebook fans and more than 32 million followers on Twitter, Bieber has enormous marketing power. As a "brand ambassador" for the SpendSmart card, the 18-year old performer will promote the card via social media and develop a series of videos that will promote responsible spending.
"By combining our new teen prepaid debit card with Justin's vast reach and financial educational materials, we can empower countless families with teens to think about responsible spending in a new and better way," said Mike McCoy, chairman and CEO of BillMyParents in a news release.
Beiber will become the face of a new version of the SpendSmart card. BillMyParents has not announced a launch date for when that marketing campaign will begin, but its public relations firm said it should happen in a couple of weeks. At that time, the SpendSmart card will get a new design, but the product features and pricing will stay the same.
SpendSmart is a prepaid debit card that can be used anywhere MasterCard is accepted. Like most prepaid cards, it has a long list of fees:
- Monthly fee: $3.95
- Loading charge $0.75 to add money from a checking or savings account; $2.95 from a credit or debit card
- ATM charge: $1.50 per withdrawal; $0.50 per balance inquiry
- Inactivity fee: $3 if the card is not used for 90 days
- Replacement fee: $7.95 if the card is lost
Is this card right for your teen?
"The good thing about a prepaid debit card is that you cannot go into debt," noted Gerri Detweiler, personal finance expert at credit.com. "You can only spend what's on the card, so for that reason it's a great way to manage an allowance."
And this Bieb-endorsed prepaid card gives parents maximum control. They can sign up for text alerts every time the card is used or download a smart phone app that makes it easy to track the balance and see individual purchases. Parents can also temporarily freeze the card if they don't like how the money is being spent and permanently block it from being used at some retailers.
But there are other factors to consider.
Bill Hardekopf, CEO of lowcards.com, doesn't like most prepaid cards in general and questions the educational value of this card.
"I'm not sure a prepaid debit card really teaches financial responsibility," Hardekopf said. "I don't know if this is the right way to go for a young person."
John Ulzheimer, president of consumer education at SmartCredit.com, points to that monthly fee, which adds up to $47 a year. He doesn't like the idea of teaching teens it's smart to pay a fee to use your own money.
"That's a very dangerous message to send a young person who is basically at the beginning of their consumer credit lifecycle," he said.
Ulzheimer said it makes sense to pay an annual fee of $50 to have a credit card with a $25,000 limit because it gives you access to someone else's money. But he said it is "unreasonable" to pay almost that much for a debit card where no credit is extended.