BET joins the prepaid card bandwagon for worse, not better
OPINION - The prepaid card is one that doesn't help anyone establish credit, costs far too much for those who have limited budgets...
What do Russell Simmons, Kim Kardashian, Lil Wayne, Tom Joyner, Suze Orman, George Lopez, and now BET have in common? They all have their own or have endorsed a prepaid debit card.
Yes…they have all jumped into the prolific market which targets working class and low income families promising to give them all the luxurious privilege of spending money to use their own money. BET has joined the ranks of those who expect people spend their money using a “glorified gift card” as they are called by John Ulzheimer, President of Consumer Education at SmartCredit.com.
The prepaid card is one that doesn’t help anyone establish credit, costs far too much for those who have limited budgets, and, because they allow those who use them to remain outside the banking system, too often insert the user into a permanent underclass of society, unable to progress economically.
BET has partnered with NetSpend (NTSP) to endorse their Control Card that promotes the following perks.
No credit check
No overdraft or other surprise fees
No interest or late fees
No standing in line to pay bills
A $10 Purchase Cushion
A 5 percent APY Savings Account
Life Benefits
That sounds pretty good to the naked eye, but as I have done with many prepaid cards before, let’s take a look at each “perk” to see if they are really benefits.
No credit check: This is a prepaid debit card which is the same as using cash. You will never have a credit check to use your cash so you will never have a credit check to use a prepaid debit card.
No overdraft or other surprise fees: I wouldn’t know about that because I couldn’t see what all the fees were unless I purchased the card…surprise! To see a complete list of the fees I could find, see the end of this article.
No interest or late fees: These cards are not extending you a line of credit. Hence, they are not helping you establish credit. Therefore, there is no need to charge you an interest rate or charge a late fee since you are only using your own money and not borrowing any money.
No standing in line to pay bills: Is this any different from any other free form of online payment?
A $10 purchase cushion: If you take the time to read the fine print in this “perk” they make it very clear this is a “non-contractual courtesy exercised in our sole discretion, by which we may approve transactions that the Control Card cardholder requests from time to time.” Translation — they are under no obligation to give you this cushion if they choose not to, so if any user finds themselves having to use this cushion frequently, they can deny you!
A 5 percent APY savings account: To have access to this feature, you must have deposited at least $500 in one calendar month. This seems like a high interest rate until you remember you are being charged at least 10 percent monthly on a deposit of $500 just to earn 5 percent yearly. That doesn’t make much sense, and is a great deal for the bank. By the way, if you are one of those who had the brilliant idea of putting a large sum of money into this account and using it as a high yield savings account just to get access to the 5 percent return that is offered, there is a clause in the fine print that states “a cap may be placed on the maximum amount of funds on maintained in the account.”
It also states the cap can change, which means in no uncertain terms, in my opinion, would they allow someone to put an excessive amount of funds into the account to earn an exorbitant amount of interest on their funds. I am sure they are not too concerned about having to implement this cap because those who use these types of cards are typically in the low income category; however, this clause hidden in the fine print I am sure was inserted to protect their interests. Life Benefits: This is extremely misleading considering you might think you are getting life insurance from the name but are only getting extremely limited “Accidental Death and Dismemberment” coverage. Trust me…the amount of money they earn from this card will far surpass any policy payouts they have to provide from this “perk”. Here are a few of the limitations on this coverage inserted to ensure it remains extremely profitable to provide this service:
This coverage is not available in all states.
Coverage is not automatic.
Coverage is only available to those enrolled in direct deposit.
Coverage is limited for a monthly benefit for only 12 months based upon the amount direct deposited during the preceding 35 day period. So if you direct deposited $8,000 in June, 0 in July, 0 in August, and have an accidental injury in September you will have zero coverage!
Coverage is limited to $8,000 because your direct deposit was before the 35 day period.
Accidental Death and Dismemberment insurance has a tremendous number of limitations itself even without those imposed by the Control Card. I urge you to go here to read about its limits.
The larger point that I want to emphasize is that as long as we continue to use these financial predators, the more they will feel they can market to our communities. We continue to feed the beast simply because there are those who want to capitalize on what we don’t know. I have personally assisted those who would have been deemed to be “unbankable” — homeless, bad credit, and formerly incarcerated; I have taken them to a credit union to open a free bank account and get access to the precious debit card with no fees. The only problem with this solution I have implemented through my nonprofit is there is a limited profit in it for those who want to make a profit for themselves outside of feeling good for helping someone.
Suze Orman, before her prolific deal to introduce her Approved Card, gave good advice when she spoke out heavily against these cards saying the following:
“I don’t think prepaid cards are a viable option…” The Money Book for the Young Fabulous and Broke © 2005
“If you can’t qualify for a credit card, I want you to start with what is known as a secured card. A secured card is a stepping-stone to getting a regular credit card.” Women and Money © 2010
”…you could simply pay with cash and avoid the fee charged for the use of the card. Better to look into a secured credit card.” The Road to Wealth © 2010
To read other solutions I have provided, you can click here. Let’s get smart, build credit the old fashioned way, and steer clear of these cards. The more we use them, the more we will depend upon them. The more we depend upon them, the further away we will be as a community from those true wealth building principles which will lead us towards true empowerment!
CONTROL CARD FEES
There are two plans — the basic plan and the discount fee plan. To become a discount plan member you must deposit $500 in one month:
Monthly Fee Basic Plan: $7.95
Monthly Fee Discount Fee Plan: $5.00
Domestic ATM Cash Withdrawal Fee: $2.50 per withdrawal PLUS ATM owner fees. (The ATM owner fee is waived at AllPoint ATMs but good look in finding one of these.)
They were kind enough to give you a few tips on how to avoid ATM fees in this section.
One tip was to request getting cash back at retailers. The two problems I have with this tip are: Retailers provide a limited amount of cash that you can receive for cash back and Many retailers are now charging a fee for cash back.
Bank Transfer Fee: $1.95 for an instant bank transfer of $100.00 or less
Cardholder-to-Cardholder Transfer: $4.95 to use the agent Customer Service Number
Balance Inquiry: $.50 to use the Toll-Free Customer Service Number each time you call
Lost, Stolen, or Damaged Card Replacement Fee: $4.95 each
Addition Card Fee: $4.95 per card
Custom Card: $4.95 per custom card
The fees listed above are only the most common costs associated with the Control Card. There is a complete list of fees but apparently one must purchase the card to see them. I tried to navigate through the site to find the complete list of fees but all roads lead to a dead end unless I purchased the card. It makes no sense to me to purchase a card before knowing exactly what I was getting into.
