Basketball legend and businessman Magic Johnson is once again putting his name on a prepaid card. This time around, Johnson's card has lower up-front fees and an emphasis on saving money.
The new MAGIC card, a MasterCard product issued by OneWest Bank of Pasadena, Calif., was designed with greater input from Johnson than
"I wanted to empower people with better tools to help them become financially secure," Johnson said in an email. "The MAGIC card will help them do things they can't do with cash and stay in control of their money."
To this end, users of the new MAGIC card, which launched last week, are encouraged to sign up with piggymojo.com, an online savings site. The website allows users to set goals for certain expenses, such as a car repair. Funds are counted toward a goal if the user chooses to cut an expense somewhere else. For example, if a user chooses not to buy popcorn at a movie, the user would text 'mojo 5 popcorn' to piggymojo to credit that $5 toward a goal.
The new MAGIC card can be obtained online or by phone, and no bank account is necessary for signup. Users can load the card by direct deposit from their employers, by bank transfer or by purchasing a Green Dot MoneyPak in stores.
Prepaid cards are typically criticized for their fees, and Johnson's earlier card, which launched in 2004, seems expensive by today's standards. The earlier MAGICCash card cost $29.95 up front and $3.95 to $4.95 to reload with cash at certain retailers. It cost $1 per paycheck to load with direct deposit.
Johnson's new card costs $4.95 to activate and has a monthly fee of $4.95. It charges for cash loads at the point of sale, but it does not charge for adding funds by direct deposit or bank transfer.
Johnson defended his new card as being helpful for his audience even though it has fees.
"This is a business, but it's a good business that's good for people," he says.
With the new card, "the biggest difference is that this is not a celebrity endorsement arrangement but rather Magic created the card in a partnership with OneWest Bank," says Tami McCarthy, a spokeswoman for OneWest, in an email. "He wanted to provide better access to an alternative payment card, one that is accepted everywhere MasterCard is and will help teach people how to save and manage their money better."
Several marketers of celebrity-endorsed prepaid cards say they rely on the input of the star attached to them. Finance guru Suze Orman and music mogul Russell Simmons have been particularly outspoken about the level of involvement they had in designing the prepaid cards they promote.
While prepaid cards are best known for targeting the underbanked, more and more people choose them for other reasons, says Madeline Aufseeser, senior analyst at Aite Group.
"Prepaid is a mainstream product used in many different ways," she says. "A lot of people don't want to expose credit card information on the Internet."
Parents also offer them to kids going off to college, since prepaid card accounts give parents an opportunity to monitor their kids' spending.
And despite the prepaid market's reputation for high fees, many people choose prepaid cards because they "can't afford the fees associated with the high price of checking," she says.
