For some people, clear limits and boundaries are required to get control over bad financial behavior. That was the case for Ryan Jaffe. He's a recovering alcoholic and co-founder of the Next Step Prepaid Master Card. It's designed for former substance abusers and marketed as a way to curb excessive spending during the recovery process. Co-signers on the card -- often a parent or rehab sponsor -- can choose daily spending limits for the cardholder and limit the number of transactions per month. In short, the card will keep the holder's financial habits on a very short leash and allow people in recovery to spend their money in a healthy manner, says Ryan Jaffe, one of the co-founders of the Next Step Prepaid MasterCard.
What issues do a recovering addict face?
"Whether it be drugs or gambling or alcohol -- that was a way to cope with life. And then you remove that from the equation and then someone's getting sober and now you have a scenario where they're trying to fill their void with other things and a lot of times it comes in the form of spending," says Jaffe.
The card is intended to address the situation of a person in recovery, but Jaffe says it isn't a long-term solution. It's meant to help addicts in their transition from treatment back into society and aid them to get to a point where they are self-supporting in a responsible manner.
"This card is not, by no means, a fool-proof plan or a relapse prevention tool. If someone wants to go out and drink or they want to go out and use, they will find a way to. We're not sitting here promoting that this is a way to completely stop someone from engaging in that behavior, but on the same hand, because one of the features of our card is we remove cash from the equation. They can't get cash back at ATMs or point of sale. They can't go to bars, liquor stores, nightclubs, gambling establishments. So if someone is serious about their recovery and they're having a bad day and they don't have that $20 in their pocket, that's one less option for them to engage in negative behavior," says Jaffe.
But what about the costs of the card? There's a monthly maintenance fee of $14.95 and an activation fee of $9.95. John Ulzheimer, president of consumer education at SmartCredit.com, says from a financial angle, prepaid debit cards have become a hot product over the past 12-18 months primarily because of the influence of celebrities like the Kardashians, Justin Bieber, George Lopez, and Suze Orman.
"From a purely comparative perspective, when it comes to prepaid debit card fees, $14.95 as a flat monthly fee is on the top of the market, but having said that, you also can't use the card at an ATM machine, which is where most prepaid card issuers are really racking up the fee-based revenue," says Ulzheimer.
Ulzheimer says the Next Step Prepaid MasterCard acts as low barrier, but is not a long-term solution and doesn't help you build credit. "When you start nailing me with $14.95 a month for access to my own money, that's when I start to think we're not really teaching people the right way of using money," he says.