Discover Financial Services is courting the family market with a prepaid card that enables parents to control and monitor teens' spending.
Customers want issuers to "provide tools, materials, and products that help me maintain control, better manage spending, and spend smarter," said Mike Boush, the Riverwoods, Ill., credit card company's vice president of marketing strategy and new initiatives.
The parental controls in the Current card, which Discover unveiled Tuesday, are "a key feature that is differentiating" from other prepaid cards, he said.
Discover has developed an online tool that lets parents specify when and where the cards can be used. They can set daily, weekly, or monthly spending limits and block certain merchant categories that they consider inappropriate. Parents also can limit automated teller machine transactions.
Cardholders pay a $5 monthly fee or a $50 annual fee and can make four free ATM withdrawals per card per month. Each additional withdrawal costs 50 cents. There are no reloading or inactivity fees, Mr. Boush said.
"A lot of the products that are out there that are designed to appeal to the prepaid customer have a lot of tiny nuisance fees," he said. "That's not the way we wanted to go with this."
Users can customize the appearance of their cards, and parents earn reward points if they use a Discover credit card to load funds on to the Current card.
Discover also is using its Web site to promote financial literacy for teens, Mr. Boush said. The site includes articles about basic concepts such as preventing identity fraud, saving, and budgeting.
Analysts said young people need more education on such topics.
Susan Menke, a senior financial services analyst at the market research firm Mintel International Group Ltd., said schools are not doing enough to teach teenagers how to manage their money. Discover and other issuers that provide financial management tools can help fill the gap, she said.
Teenagers are not as financially literate as they think, she said. In an October survey of 411 people ages 12 to 17, 79% said they thought they were knowledgeable about basic financial concepts. However, a Federal Reserve Board test periodically given to high school seniors reveals that many lack basic financial literacy. Last year they scored an average of 48% on the test, versus 52% in 2006.
"There is a benefit" to financial education programs, "because of the credit situation and what we're going through," she said.
Bruce Cundiff, a director of payment research and consulting for Javelin Strategy and Research, agreed that financial education for young people is important.
"The younger you work with children, the better they understand … [fiscal responsibility] and how to protect themselves from things like identity theft," he said. "It's learned behavior."