Faddish consumer products have notoriously short lives. And thankfully, after just three weeks on the market, the Kardashian Kard, possibly America’s dumbest financial product, has gone the way of the Pet Rock, the Edsel, and acid-washed jeans.
The card is—rather, was—a prepaid debit product, laden with truly egregious fees and hawked hard to the young, the restless, and the financially illiterate. Parents could load money onto the card for use by teenagers without a credit card or checking account. But, as I noted in a story last week, those young customers paid dearly for the privilege of carrying Kardashian plastic:
First there are the upfront costs. For a six-month card customers pay $59.95, or $99.95 for a 12-month card. (The median fee for similar, non-Kardashian-festooned products is $10.) After those six or 12 months, there is the $7.95 monthly fee to keep using it. Users pay a $1.50 fee to withdraw cash at an ATM and a $1 fee to check their balance. They pay $1.50 to speak with a customer service representative. If they lose their card, they have to pay $9.95 to replace it. If they want to cancel their card, they have to pay $6.So let’s pretend that our teenage Kardashian fan somehow harasses her dad into getting her a six-month Kardashian Kard for her $200-a-month allowance. That would be $1,200 for the life of the card. But she checks her balance on average once a month, withdraws cash at an ATM a couple of times, and calls customer service when the card cracks, requiring replacement. At the end of six months, for $1,200 in spending, she would have paid $80.40 in fees—about 6.7 percent of her “balance.” If the teenager had a checking account with a debit card, the fees would probably be somewhere between zero and $36.
Prepaid debit has its advantages, such as enabling customers without bank accounts to avoid carrying large sums of cash. But for most young people, a checking-linked debit account works better than a prepaid debit card, offering more protection for fewer fees. Even among prepaid debit products, the Kardashian Kard stood out for its absurd up-charges.
It turns out that those up-charges actually did the card in. Shortly after my piece came out, Consumers Union, already a fierce critic of the product, launched a full-on attack, with an online petition and Twitter campaign. Dozens more critical stories piled up. On Black Friday, Connecticut Attorney General and Senator-elect Richard Blumenthal joined in, announcing that his office had requested more information about the “predatory” card’s fee structure.
The card “appears to specifically target young adults in evoking the name and image of the Kardashian family who showcase lives of luxury and extravagance,” Blumenthal wrote. “[T]he family is marketing a dangerous financial fantasy. Ironically, the Kardashian Kard will distance consumers from the financial abundance key to the Kardashian’s lifestyle. Consumers lose money before they can use it with this card.”
The Connecticut investigation and allegations about hidden fees—plus all the bad press—prompted the sisters to kill the card. Dennis Roach, a lawyer for Dash Dolls, the sisters’ corporation, sent a notice of termination, canceling their endorsement agreement.
“The Kardashians have worked extremely long and hard to create a positive public persona that appeals to everyone, particularly young adults,” he wrote in a letter copied to the Connecticut A.G.’s office. “They have been successful in doing so because they are recognized as honest, ethical, and fun-loving individuals who are kind and caring to others. Unfortunately, the negative spotlight turned on the Kardashians as a result of the Attorney General’s comments and actions threatens everything for which they have worked.”
The poor Kardashians, threatened by ugly meanies insisting that they stop pushing a dangerous product on a vulnerable segment of the population!
University National Bank of St. Paul, Minn., the bank issuing the card, said today that the 250—yes, just 250—people who bought the product can use it for 30 more days before getting their money back.
And what is University National Bank, the financial firm behind the product, you ask? It is part of a Minnesota-based corporation called Sunrise Community Banks. It is a community development financial institution—certified by the Treasury to be eligible for “monetary awards and tax credits for promoting capital access to low-income communities.” Here we have a financial institution that boasts of its success in helping the poor, backing a high-fee product hawked to teens.
Sunrise did not return my calls immediately. But the Minnesota Post caught up with the institution’s CEO, David Reiling. He admitted the product is not the cheapest out there but defended it in light of the corporation’s lending mission.
In explaining the Kardashian Kard role in its business mix, Reiling said it supports the bank’s mission to “provide financial service for the unbanked. [To do that, though, we] have to take on some traditional prepaids. We need a blend [of products].”
All sorts of financial companies have seen their profits crimped by new regulations, imposed in the Dodd-Frank Law, the CARD Act, and other recent pieces of legislation. With those fees gone, they’re creating new financial products in order to collect new fees. The bottom line? If it seems faddish and comes with a lot of fine print, it probably isn’t worth keeping up with anyway.