Teen spending meets the 'stored-value card'

Parents may employ widely different tactics in navigating the complex issues of the teenage years. But when it comes to monitoring teen spending, many agree: You can't be too vigilant.

Some of the biggest credit-card companies have created products over the past year that they say will help parents keep tabs on their offspring's outlays - and also help teach teens about managing money.

Prepaid stored-value cards look like credit cards, but they're not. Parents fund the cards by calling a toll-free number or going online to transfer money from a bank account or from a credit or debit card of their own.

Interest appears high. About a half million people visited a website set up to promote Visa's Buxx card (www.nc.visabuxx.com) within two weeks of the card's September 2000 launch, according to Kenny Thomas, director of corporate relations at Visa USA. The company now gets 5,000 to 6,000 requests a day for information about the card.

Visa has also launched versions called PocketCard and M2card. A stored-value card from American Express, the Cobaltcard, is being introduced nationwide. And MasterCard reportedly has a version in the works.

Depending on the card, certain kinds of purchases - such as cigarettes - can be blocked. ATM fees, cash back at point of sale, and other costs and services vary. (For a detailed, card-by-card comparison, go to www.bankrate.com and enter "stored-value cards" in the search field.)

"Managing personal finances is a necessity for today's teens, who spend more than $153 billion a year - mainly cash," says Jeff Kann, executive vice president at Visa.

Proponents of the cards point to their main advantage over cash: Using the cards requires a personal-identification number, so the impact of a lost of stolen card is clearly lower than that of lost cash. And the websites that support the cards - reporting on their use, for example - also serve as online centers of education about teen money management. An application for the Buxx card can't even be completed until parents agree to take their children through a financial-skills assessment test.

Critics counter that the cards - generally accepted wherever their "parent" card is accepted - amount to little more than an introduction to spending with plastic.

"It's not this year's great discovery," says Jean Ann Fox, director of consumer protection at the Consumer Federation of America in Washington. "It's just the credit-card companies' effort to get loyalty from teens."

Card companies, of course, don't view such brand loyalty as a negative goal. "Some of our issuers are not charging a fee because they see this as ... a relationship-building tool with young people," says Mr. Thomas of Visa.

Some experts see the cards as just one component of what should be a broader effort to help kids get a handle on consumerism.

"Parents should use every opportunity when they get the spending statements to teach personal-finance lessons," says Dara Duguay, executive director of the Jump$tart Coalition for Personal Financial Literacy in Washington. "Only 10 percent of kids receive personal-finance education prior to high school graduation," Ms. Duguay says, "because many parents themselves don't know about money management."

With its website, www.jumpstart.org, the agency targets teachers and parents. "These stored-value cards can be a good thing," Duguay says. Even though they represent cash spending, and not credit, "they can teach how to use credit responsibly. There's no danger involved ... [because] there are parental limits."

(c) Copyright 2001. The Christian Science Publishing Society