National Consumers League

The Kardashians’ teachable moment


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By John Breyault, Vice President of Public Policy, Telecommunications and Fraud Recently, the Kardashian sisters, of reality TV show fame, released a prepaid debit card to significantly less-than-rave reviews. Why? The card, labeled the “Kardashian Kard,” and marketed to teen viewers of “Keeping Up with the Kardashians” was so chock-full of fees that users of the card essentially lost money on the card before they even had a chance to use it, according to a November 26 letter from Connecticut Attorney General Richard Blumenthal (former NCL Trumpeter Award recipient) to University National Bank, the issuer of the card. A sampling of the fees levied on the Kardashian Kard included:

  • $7.95 per month maintenance fees
  • $5 minimum deposit
  • $9.95 card purchase fee
  • $1 fee to add value to the card
  • $1.50 fee when the user contacts a live operator
  • Bill pay fee of $2.00 per transaction
  • $9.95 to card replacement fee
  • $6.00 fee to close the account
To their credit, the Kardashians agreed to have the cards removed from the market in response to Blumenthal’s inquiry and the resultant firestorm of negative publicity. However, this episode illustrates the pitfalls for consumers of these prepaid debit cards, one of a fast-growing portion of the consumer credit market. According to the Boston Consulting Group, the U.S. market for branded prepaid cards is expected to nearly quadruple by 2017 to more than $440 billion. One factor that may be driving the explosive growth of this market is that reloadable prepaid debit cards like the Kardashian Kard are exempted from the gift card rules established by the 2009 CARD Act. For consumers, this means that these cards may have unexpected fees that traditional gift cards do not. In addition, reloadable prepaid cards are not required to provide fraud protection. Whereas with debit cards, the cardholder’s liability for fraudulent purchases is limited to $50 (or $500 if the loss is reported more than two business days after the loss), reloadable prepaid cards offer only voluntary protections provided by the issuing bank. So how can consumers protect themselves from the hidden fees on these cards? Our colleagues at Consumers Union have provided a great list of consumer tips regarding prepaid cards like the Kardashian Kard:
  • Consider a regular bank account instead—you get a debit card, a monthly statement, and full consumer protections. Don’t opt in for “overdraft protection” to avoid costly overdraft bank fees.
  • If you decide you want to use a prepaid card, find and read the fee schedule before you buy one. Your cost will vary widely depending on which prepaid card you pick. Make a list of how you will use the card and compare the fees. Try to figure out the costs for two months so that you can get a better idea of the full cost of using the card.
  • Keep track of your balance –you might face high fees for going over. Sign up to receive a written statement in the mail to keep track of your money.
  • Don’t get a prepaid card that comes with a credit line or overdraft loan to avoid overspending and going into debt.
  • Do not use prepaid cards to purchase gas at the pump, for hotels or rental cars. If you do, you may find you will not have access to more funds than the purchase and for a long period of time.
  • See if your card has different fees to choosing signature instead of PIN, or selecting the “credit” option instead of choosing the “debit” option.
  • Don’t rely on a prepaid card to build a credit record because most prepaid card issuers don’t report customer information to the major credit reporting agencies