Kardashian Kard KO: What We Learned

As pre-paid debit cards go, the Kardashian sisters' offering wasn't the worst thing out there. But it was loaded with enough usury fees that the Kard kollapsed under a wave of negative publicity and was pulled from the market after three weeks.

As bad as the Kardashian Kard fees were, though, they were in the ballpark with many other pre-paid debit cards. Consumers Union reviewed the terms and conditions of 19 pre-paid cards and found:

• 12 had an activation fee of up to $39.95.
• 16 had a monthly fee up to $9.95.
• 19 charged a fee to withdraw cash from an ATM.
• 18 charged a fee to check the balance at an ATM.

There are plenty reasonably priced pre-paid cards out there and plenty good reasons for your child to carry one, which I pointed out when the Kardashian Kard was unveiled. Perhaps the high-living, high-profile sisters did us a favor by entering the debit-card market with a predatory product and calling attention to the myriad ways that this industry profits from consumer inattention.

The warning could not have come at a better time. More than 30 new reloadable debit cards for teens are planned by Christmas, The New York Times reports. For marketing purposes, these cards will feature the likes of surfer darling Kassia Meador and the countercultural comic character Emily the Strange.

Pre-paid debit cards are replacing credit cards as the plastic of choice. One exploding niche is the gift-card market, which will reach $91 billion this year, up from $86 billion in 2009. The projection for 2011 is more than $100 billion, reports TowerGroup.

Much of this growth is being fueled by new and comforting consumer protections on pre-paid cards against things like usage and various hidden fees, and against expirations while money is still on the card. TowerGroup estimates that 3.1% of gift-card value will go unused this year, down from 10% in 2007. But that's still nearly $3 billion of waste (or profit if you are the card issuer).

So thank you Kardashians for a much-needed wake-up kall.

Photo courtesy Flickr user shoppinkcherie.

Dan Kadlec

Daniel J. Kadlec is an author and journalist whose work appears regularly in Time and Money magazines. He is the former editor of Time’s Generations section, which was written and edited for boomers. Kadlec came to Time from USA Today, where he was the creator and author of the daily column Street Talk, which anchored the newspaper's business coverage. He has co-written three books, including, most recently, With Purpose: Going from Success to Significance in Work and Life. He has won a New York Press Club award and a National Headliner Award for columns on the economy and investing.

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