Teenagers are being targeted with a series of pre-paid cash cards. While some fear it will encourage youngsters to get into debt, others believe they are safer and easier to use than carrying cash and are bringing pocket money into the 21st century. By Catherine Turner
A wave of pre-paid cash cards, which may become the new form of pocket money for teenagers, has caused concerns about youngsters being encouraged to get into debt. The multi-coloured MasterCards, co-branded with Emap teenage magazine titles such as Smash Hits and Bliss, are being backed by a raft of advertising across the publisher’s channels, as first revealed in Marketing Week last week.
Detractors are concerned that the cards are being aggressively marketed to children as young as 13, and could lead them to irresponsible spending in later life. But others say the move marks an evolution in the way teenagers obtain and manage money.
The products are primarily aimed at teenagers, but can be topped up by parents, relatives and family friends with a credit or debit card. Whenever a purchase is made using the card, the transaction amount is deducted from the available balance. The card bears MasterCard’s Maestro and can be used wherever the brand symbol is displayed, meaning services are available outside the UK.
Jo Carr, a director of financial services marketing agency TeamSpirit, says the rise of financial services products for teens must lead to a review of guidelines governing their promotion. She believes financial marketers are attempting to create a cashless society, and that the cards are a natural progression, albeit an unpalatable one for many critics. “In many ways, this is bringing pocket money into the 21st century,” says Carr.
Dominant method of payment
According to a Datamonitor report released last year, cards are swiftly becoming the dominant method of payment in the UK, replacing cash and cheques. In 2004, the value of transactions made on credit and debit cards was equal to 60.1 per cent of the value of total household expenditure. By contrast, the value of transactions made on plastic cards in 2000 was 44.1 per cent, and just 26.7 per cent in 1995.
Carr voices concerns about the cards becoming status symbols to a brand-savvy, fashion-conscious audience. “They run the danger of being coveted for what they look like, in an age when advertisers are being urged to be more responsible in marketing to children,” she warns. “This is a financial product aimed at a very impressionable audience. You cannot be too careful.”
Pre-paid cards for the teen market have already enjoyed success in countries including the US and Spain. Across the Atlantic, Visa offers Buxx, a teen card distributed through banks; but few cards are linked to mainstream consumer brands. The way UK card-reading machines only allowed “offline” transactions until October last year severely limited the rise of pre-paid products in this country. Making payments of less than &£50 via an offline terminal meant it was technically possible for such cards to go into arrears.
In the US, pre-paid cards – including some aimed at those without a bank account – now represent four per cent of all in-store payments. Aggregate spending on US pre-paid cards is projected to reach $257bn (&£146bn) a year by 2009, according to ePaynews.com.
Payment card provider Bluecorner, the consumer division of Affinity Cards which helped develop the Emap/MasterCards, is predicting similar growth here. Chief executive Mark Kennedy insists that the cards offer a safer and more convenient way for children to carry cash, while complaints that charges are too high are not correct.
Kennedy says: “The key message is safety,” adding that Bluecorner products offer a safer and easier alternative to carrying cash, shopping online and spending abroad. He also says that, despite criticisms that the account charges are too high – &£9.95 to open an account, &£4.99 to upgrade or cancel and up to &£4 to top up – competitors’ fees are greater.
Emap commercial director Nigel Waters agrees. He says people are too used to free banking facilities, but the co-branded cards offer value for money for services offered. “These are not credit cards,” he says. “Children cannot get into debt.” He also believes children mature more quickly these days, and the card will teach financial responsibility and budgeting. “Nothing that has been spoken about [the cards] would change my mind about their value,” he adds.
Encourage children to save
The cards could potentially encourage children to save, with proposed links to savings accounts, though critics say marketing of the cards is heavily geared towards spending. Ads running in Bliss magazine for a Platinum Card urge readers to “splash the cash”, and emphasise shopping discounts and special offers available.
A spokeswoman for the National Consumer Council (NCC) says: “The idea promoted – shop till you drop – isn’t a responsible message. Although you can’t go into debt with these cards, the message is fuelling pester power.” She adds that the organisation has “strong reservations” over a pre-paid card for teenagers, arguing that youths would be better off having cards directly linked to current accounts, which did not cost anything to set up, or for money transfers.
Encouraging teens to spend by card rather than cash could lead to them developing a “plastic habit” and turning to the array of credit deals on turning 18, warns the spokeswoman.
But Waters says that all deals and marketing programmes are approved by individual editors who know their core markets “better than anyone”. EMAP, which has also launched Magic FM and Max Power cards, is readying the next tranche of titles to market, with plans for extended offers, benefits and tie-ups.
Bluecorner is also launching a pan-European Hello Kitty card designed to appeal to 20-something women, and is in talks with Hertfordshire police and council to introduce an “anti-bullying” card across the region, without the &£9.95 start-up charge. This could work by preventing children being attacked for their lunch or pocket money, because it is only available via the card.
While Bluecorner and Emap are first to market, competitors are developing products. PrePay Technologies is considering distributing pre-paid debit cards with MasterCard aimed at the youth sector, and consumers who do not have a bank account. PrePay estimates there are six to eight million people without accounts in the UK, including under-18s. Up to a third of these do not have the status to hold bank cards.
An insider claims that many banks and building societies are aiming to provide products linked to children’s savings and current accounts. Clydesdale Bank last week announced it was to launch a card aimed at those without bank accounts or with bad credit history, while various government departments and employers are scrutinising the use of such cards in payroll and benefit schemes.
Popularity of the cards has yet to be proven, but as with pre-paid mobile phones in the 1990s, the whiff of controversy and edginess will remain the products’ attraction for kids. And, just as with mobiles, pre-paid cards could become as much the talk of the high school as they are of the high street.