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Discover Financial Services believes a "simple and transparent" fee structure along with parental controls will help differentiate its teen-focused reloadable prepaid debit card from others on the market.
Customers want issuers to "provide tools, materials and products that help me maintain control, better manage spending and spend smarter," Mike Boush, Discover vice president of marketing strategy and new initiatives, tells ATM&Debit News.
The parental controls in the Current card, which Discover unveiled Feb. 23, are "a key feature that is differentiating" from other prepaid cards, he says.
However, the controls are not entirely new. Launched in 2000, Visa Inc.'s Buxx card offers some forms of parental control through a Web site and card statements. MasterCard Worldwide's Allow card has similar controls.
For its Current card, Discover has developed an online tool that enables parents to specify when and where their children can use their cards. They can set daily, weekly or monthly spending limits and block certain merchant categories they deem inappropriate. Parents also can limit ATM transactions.
Cardholders or their parents can opt to pay a $5 monthly fee or a $50 annual fee, and cardholders can make four free ATM withdrawals per card per month. Each additional withdrawal costs 50 cents. There are no reloading or inactivity fees, Boush says.
"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 says. "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 into the Current card account. Discover protects cardholders with its zero-liability protection against fraud loss, and users are eligible for in-store coupons and online discounts when they use the card at participating merchants.
Discover also is using its Web site to promote financial literacy for teens, Boush says. The site includes articles about basic concepts such as preventing identity fraud, saving and budgeting.
Analysts say young consumers need more education on such topics.
Susan Menke, a senior financial services analyst at market research firm Mintel International Group Ltd., says 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 says.
Teenagers are not as financially literate as they believe, Menke says. In an October survey of 411 consumers 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," Menke says.
Bruce Cundiff, a director of payment research and consulting for Javelin Strategy and Research, agrees that financial education for young consumers 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 says. "It's learned behavior." ATM
