Is the Public Dumb Enough to Buy a “Middle-Class” Prepaid Debit Card?

At first blush, a prepaid debit card for consumers who already have real debit cards seems like the kind of idea that gets someone kicked out of the board room. Don’t tell that to Kaiku Finance, though. This week, the California-based financial firm announced its intention to issue a prepaid Kaiku Card aimed at middle-class consumers who already have a bank account and simply want to put more plastic in their wallet.

This is, hands down, the dumbest idea we’ve heard all year. However, like bottled water, the notion of prepaid debit cards for the middle class might just be dumb enough to succeed – and quite frankly, that scares us. Here’s why.

Prepaid debit cards are the most profitable pieces of plastic on the market right now. They’ve been a huge hit with the millions of unbanked consumers who lack the education, desire or financial means to open a traditional checking account. Low-income households love them, celebrities like Suze Orman and Lil Wayne endorse them and banks spend more money on marketing them than they do any other type of plastic card. That said, prepaid debit cards are also kind of a rip-off.

These cards carry a ton of fees that you won’t find on standard debit or credit cards. Most people don’t know the true cost of prepaid debit cards. Take the NASCAR-sponsored prepaid Visa card, for instance. The card charges $6.95 for your first purchase, $5.95 for monthly usage, $2.50 to withdraw cash from a non-network ATM (on top of the ATM fees) and a $4.95 replacement fee if the card is lost or stolen. And these fees are ubiquitous in the prepaid market. A study recently found that the average prepaid card costs nearly $300 a year to maintain.

America’s willingness to take on that kind of overhead is both ridiculous and worrisome. Up until now, we assumed prepaid debit would remain a product for the lower-income brackets, because “already banked” middle-class consumers have far better payment options available to them. We’ve held on to the belief that the average middle-class consumer wouldn’t be swayed by a card just because it has a picture of the Kardashian sisters on it. But the announcement of the Kaiku Card makes us wonder. Maybe we’ve been wrong.

Maybe Wall Street knows something we don’t. Maybe middle class consumers really are just as easy to take advantage of as anyone else. Maybe we are collectively gullible enough to fall for the same old snake-oil sales pitch. You know – “With unparalleled features and benefits, low fees, and unsurpassed access and mobility, the Kaiku Visa Prepaid Card fits any lifestyle.” That sort of thing.

The Kaiku Card isn’t as burdened by fees as other cards, but it still costs more to maintain than a debit card linked to a standard checking account. And although the Kaiku card offers things like mobile banking and text alerts, credit cards have been offering the same features for years. In short, it’s unnecessary addition to a market that’s overflowing with superior products. And there’s a growing fear in our hearts that America is going to eat it up.

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