A company that uses Canadian singer Justin Bieber to promote prepaid debit cards
says the cards help teach kids to handle money but financial experts disagree.
SpendSmart Payments Co. Chief Executive Officer Mike McCoy told ABC News the prepaid cards provide teenagers "freedom and independence while also teaching them the fundamentals of financial responsibility."
"More importantly, the SpendSmart Card gives parents control over their teens spending habits, supporting them in instilling valuable financial literacy fundamentals," he said.
Consumer Reports cautions people to be wary of fees companies charge for prepaid debit cards.
SpendSmart charges $3.95 per month, plus loading fees of $2.95 from a credit card or 75 cents from a checking account, though a single scheduled monthly automated payment from a checking account is free, ABC said. There are charges for withdrawing from an ATM, balance inquiries and if the card isn't used for 30 days. The cards come with automated tools to guard against misuse.
Michelle Jun, an attorney with Consumers Union, which publishes Consumer Reports, told The New York Times her organization does not recommend parents get prepaid cards for their teens.
"It doesn't help your teen establish a credit history or a relationship with a financial institution, so we recommend going the traditional route and opening up a checking account at your bank or credit union of choice," she said.
"You know, when I was a kid, we didn't have a lot of money, so me and my family had to watch the money that we spent," Bieber says in SpendSmart's "Real Talk" video series. "I learned if you have $100 or $100 million, if you spend more than you have, you're going to be broke."
SpendSmart had no comment on the financial arrangement and Bieber's representative didn't respond to a request for comment, ABC said.
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