The popular Hello Kitty brand — commonly found on stationery, purses, pajamas and other items for children — will soon start appearing on a new platform: a MasterCard debit card.
"Freedom! You can use the Hello Kitty Debit MasterCard to shop 'til you drop," the card's Web site enthuses.
The prospective audience? The young women who grew up with the 30-year-old icon -- as well as much younger girls. "We think our target age group will be from 10 to 14, although it could certainly go younger," said Bruce Giuliano, senior vice president of licensing for Sanrio Inc., which owns the brand.
Since only parents (or at least anyone older than 18) can sign up for the card, Hello Kitty thinks it's a great way for adults to "help teach their children how to manage their finances," Giuliano said. Next up, he added, is a prepaid Hello Kitty cell phone.
Little kids, big bucks
The card, due out in a few weeks, is the latest example of how corporations aggressively court the $30 billion-a-year youth market. Until recently, financial institutions pretty much ignored this powerhouse of spenders. The Hello Kitty card shows those days are gone.
"Children are now open game, prey to many financial institutions in this country," said Joline Godfrey, author of "Raising Financially Fit Kids" and chief executive of Independent Means Inc., a California financial-education firm. "Financial institutions used to be pretty conservative members of the community, preaching balanced budgets, home ownership and savings. Over the course of time, they have become more partners with retailers teaching children how to spend and consume." As a result, she said, the cards become a "great educational tool . . . to say to kids, 'Spend, spend, spend, buy, buy, buy.' "
Officials at MasterCard and Visa, which introduced a prepaid debit card for teens called Visa Buxx in 2000, say the cards are an educational tool. "We think it's a good way to teach teens good money management early on," said Rhonda Bentz, spokeswoman for Visa USA.
Convenience at a cost
Hello Kitty's lesson comes with a cost. The activation fee is $14.95 (and another $14.95 if you renew after a year). There is a $2.95 monthly maintenance fee, a $1.50 ATM-withdrawal fee and a $1-per-minute fee to talk to a customer service agent.
The fees are "probably the worst I've run across," said Robert McKinley, chief executive of CardWeb.com Inc., a Frederick firm that tracks the credit card industry.
Peter Klamka, president of Legend Credit Inc., which developed the Hello Kitty card, says his fees are smaller than a couple of branded cards. Because it is not a credit card, he added, the card cannot make money by charging interest.
The fees are helping drive the market for prepaid cards to young consumers, Godfrey said. "Up to now, banks ignored them because if they couldn't charge fees for checking accounts, they were too expensive to put into the business plan." But with fees, debit cards now "represent significant revenue dollars for financial institutions."
Travis Plunkett, legislative director of Consumer Federation, said: "It looks like the adolescents being targeted for this card will learn another unfortunate fact of life: More credit card companies are nickel and diming consumers with higher fees."
Hello Kitty is not the first plastic card aimed at children.
In fact, "teens' wallets are mostly full of plastic — gift cards, store loyalty cards, phone cards," said Michael Wood, vice president of the Illinoismarketing firm, Teenage Research Unlimited. Wood said about one in six teenagers have debit cards. But now those cards are finding their way into the wallets of younger and younger children.
Last year, Visa issued a Hilary Duff gift card in five denominations from $25 to $200, to lure the preteen fans of the Disney star. Its promotions urged girls to "shop like a star."
Duff, in a press release announcing the card, said it was "the perfect way to shop for school and beyond. . . . Now I can easily buy stuff online without having to borrow my parents' credit card."
The Duff card was supposed to be for 13 to 17 year olds, but it turns out "parents bought it for very young consumers, 8 and 9," Klamka said. What makes the Hello Kitty card different is that it doesn't automatically expire when the amount on it is used up. Parents can reload the card anytime.
By contrast, the Duff card was a one-time card that couldn't be reloaded. And parents complained about that, Klamka said. "We had hundreds of parents calling every week saying they wanted to put more money on the card."
Parents of boys also called in, requesting a comparable product aimed at boys. "That's not as easy as you think; the market's very splintered on what influences boys," Klamka said. But he's working on it, and hopes to announce a new boy-oriented product "very soon."
The Visa Buxx card allows parents to put money on a child's account and then monitor his or her purchases, as they occur as well as at the end of each month. On Visa Buxx and Hello Kitty cards, teens can only spend the amount on the card; they cannot go into debt by going over their spending limit.
McKinley estimates there are about 100,000 Visa Buxx cardholders. Visa's Bentz wouldn't provide any numbers, but she said card users were increasing by 4 to 8 percent a month. Half the cardholders are ages 13 to 15; the rest are 16 or older, she said.
"It's no different than an allowance; just a safer way to manage an allowance because if you're a parent, you can find every place your daughter spent her money: how much, when and where," Klamka said. "You get a higher level of control than just giving your daughter $100 and say, 'Go to the mall.' "
Consumer advocates call the cards nothing more than "credit cards with training wheels," that teach the convenience of plastic without any of the consequences. "It's laying the groundwork for children to become credit card users as adults," said Plunkett, of the consumer federation.
Youth marketing executives predict more cards are on the horizon, particularly as the youngest generation uses the Internet to shop. "Up until now, the financial markets have been a little gun-shy about targeting kids directly, but I think that will change and a debit card is a vehicle that provides that opportunity," said Paul Kurnit, president of KidShop, a New York youth-marketing consulting firm.
The pleasures of plastic are not just being waved at 8- and 9-year-olds, as a visit to any toy store will demonstrate. There is Playskool's Eazy Scan Supermarket for 3-year-olds that comes with a swipeable credit card. Barbie's Shop with Me Cash Register takes the retail experience one step further with what it calls "realistic shopping accessories;" in this case it's a toy American Express card. The toy promises "hours of nonstop fun . . . to enhance social skills" while learning.
For slightly older girls, 9 and up, there is the Mall Madness board game by Milton Bradley, where the goal is to "find the steals and deals." The winner is the first shopper to make six purchases and get to the right destination. To do that, girls can swipe their cash card or get money at the ATM. As the blurb on the box says: "Hey girls! Don't miss the next big sale."