A New Life for Teen Cards?

  Earlier this year, Bank of America announced plans to discontinue marketing prepaid Visa cards designed for teenagers. Despite the move, a Conshohocken, Pa.-based prepaid debit card company hopes that by getting schools involved it can do a better job at distributing teen cards than have financial-institution issuers.
  Indeed, ECount Corp. hopes its new card, called Firm, will generate a much greater interest in teen cards than has the Visa Buxx card.
  The Firm card differs from the Buxx card in several significant ways. While Visa issuers market the Buxx card, the Firm card is promoted by a company that is not a bank and is sold only via a Web site, which is also where more funds can be loaded onto the card.
  "Visa is issuing [the Buxx card] through banks," says Mark Harrington, eCount senior vice president of marketing. "We thought it would be better to widen the distribution."
  The Firm card also carries the Visa brand and is issued by New York-based J.P. Morgan Chase & Co. A key part of eCount's distribution strategy is the Web site. There, schools and parents can download financial literacy materials that can be used in classrooms or in households.
  The goal is to tie schools and parents directly to the distribution of the cards, says Harrington. Banks that have sold the Buxx card have done so not so much with education in mind but on the belief that the product will spur parents and teenagers to create new banking relationships, he claims.
  "We are not just selling cards to teenagers," he says of the financial "curriculum" that eCount is offering to parents and educators. "We want to engage the parents, schools and other organizations."
  Tim Sloane, principal analyst with the Boston-based Mercator Advisory Group, says he believes eCount is on the right track with its marketing strategy for teen debit cards. The focus on existing customers by financial institutions is too narrow for a prepaid debit product such as a teen card, he says.
  "They (eCount executives) are being independent from any particular bank," Sloane says. ECount's encouragement of repeat visits to an informational Web site also will build a valuable knowledge base of Firm card customers and users, he says.
  Cardholders can load value on a recurring basis from the Web site via the automated clearing house system by using the account and bank-routing data from a personal check or through direct deposit of all or a portion of a paycheck, says Harrington. The Firm card costs less to purchase and maintain than the Buxx card, he says.
  ECount offers the card for a $5.95 monthly fee, or a $69.95 annual fee. Ecount also offers parents four "allowance" funds transfers to the cards per month and offers teenage card users four free ATM withdrawals per month. Buxx cards typically cost $19.95 per month, counting ATM surcharges, says Harrington.
  Teen cards most often are used to withdraw cash at ATMs, says Harrington. "We talked to a lot of teens, and they said they would do about one ATM withdrawal a week," he says.
  The Firm card also comes in the mail with a teen's name embossed on it, although the card only can be issued to a co-signing parent. Parents and their children also can check the balance and track spending and transactions online.
  Sloane says eCount eventually may offer Firm card-using teens their own bank accounts as they get older, perhaps through Chase as the Firm card issuer.
  Indeed, prepaid debit cards may be offering companies such as eCount entry into broader financial services traditionally offered by banks, observers say.
  Gary Palmer, chief operating officer at Sunrise, Fla.-based Wildcard Systems Inc., which processes Buxx transactions, says third parties are using prepaid debit cards to compete with banks for a broad array of financial services.
  The Buxx card, meanwhile, is designed for use by teenagers, but Visa issuers market it to parents. The card has had mixed success since Visa launched it five years ago.
  In January, for example, Visa's largest debit card issuer, Charlotte, N.C.-based BofA, stopped selling the product. The bank now only allows existing Buxx card customers, mainly parents of teenagers, to load value on the cards.
  While BofA sales of the Buxx card grew by 75% from 2003 to 2004, the bank cited a lack of interest among Buxx card users to start new bank accounts.
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