Celebrities get out of the prepaid card business
Earvin 'Magic' Johnson announcing plans for the MagicCash Visa Debit Card, 2004.
When it comes to celebrity endorsements, there are plenty of success stories. Michael Jordan’s name brought in more than $2 billion for Nike last year, and back in May, Apple paid $3 billion to snap up rapper Dr. Dre’s Beats.
But there are some things a famous name just can’t seem to sell. Case in point: prepaid debit cards.
Magic Johnson and financial adviser Suze Orman pulled their prepaid cards about a month ago. Lil Wayne appears to be the latest celebrity to bow out. Try applying online for the Young Money card he endorsed, and you get an error page.
"This was sort of low-hanging fruit," says Matt Britton, CEO of the marketing agency MRY. "Prepaid cards is a growing phenomenon, so I think celebrities initially saw this as a great opportunity for 'me to be able to leverage my fan base.'"
Consumer spending with prepaid cards jumped 6 percent last year to more than $118 billion, according to the Nilson Report. The cards are increasingly popular with people who don’t want traditional checking accounts - and those who can't get them.
"A lot of these - particularly newer prepaid card offerings that have more transparent fee structures - make a pretty compelling option for them," says Greg McBride, chief financial analyst at Bankrate.com.
Hidden fees helped tank the Kardashian family’s attempt at a prepaid card a few years ago, and more cards now disclose their costs.
"The lack of regulation is the downside," says Susan Weinstock, director of consumer banking for the Pew Charitable Trusts. "These cards do not have any protection should you lose the card or it gets stolen."
Weinstock says federal regulators plan to weigh in on prepaid cards this summer. As for whether celebrities should keep endorsing them, Britton says it takes a star with a "pristine brand" and a broad enough fan base to make it work.
"LeBron James, maybe, especially since his move to Cleveland," she says.