Justin Bieber may be hemorrhaging Twitter followers by the millions, but the 19-year-old has landed a $3.75 million contract to sell prepaid debit cards to teenagers — with a little help from their parents.
The Canadian superstar will also pocket potential royalties and a stock option to buy two million shares of SpendSmart Payments Company stock, who are bankrolling his 14-month contract.
The savvy finance company will also exploit Bieber’s social media network to the fullest. From Thursday onward a video featuring the singer will roll out on his YouTube channel, Facebook (52 million plus likes) and on Twitter (it was 37.3 million but is now reported to be 17.8 million).
In it, the pop superstar talks about his almost infinitely poorer beginnings in Stratford, Ontario, telling his audience of potential teens and parents:
“You know when I was a kid, we didn’t have a lot of money, so me and my family had to watch the money that we spent. I learned if you have $100 or $100 million — if you spend more than you have, you’re going to go broke.”
Bieber then urges his viewers to “have a talk with your family about money,” because, “managing your money is important and there’s a great company that can help you do that called SpendSmart.”
Further videos, called “Real Talk,” will roll out down the line and will continue to feature Bieber discussing financial literacy while encouraging teens to share their videos.
While some, such as Noreen Jenney Laffey, president of Celebrity Endorsement Network, have praised SpendSmart as “brilliant” for attaching themselves to a star with the wattage and social media reach that Bieber commands, others are not so approving of the fees that come with prepaid debit cards.
Although the card has built in controls for parents — who will be footing the bill — so that when teenagers use it, it alerts them instantly via text messages and a smartphone app and allows blocking; there are other concerns.
The New York Times reveals Consumer Reports’ 2012 report criticized prepaid cards for high fees.
SpendSmart fees include a monthly fee of $3.95; loading fees of $2.95 from a credit card or 75 cents from a checking account (but a single regular monthly automatic payment from a checking account is free); $1.50 to withdraw from any A.T.M. (plus A.T.M. surcharges), 50 cents for an A.T.M. balance inquiry; $7.95 for a replacement card and $3 for 30 days of inactivity.
Designed to teach financial responsibility to teenagers, Michelle Jun, a lawyer with Consumers Union, which publishes Consumer Reports, said SpendSmart’s fees were not as high as other prepaid cards, but still advised against the card.
“We would not recommend that parents use prepaid cards for their teens,” Jun said. “It doesn’t help your teen establish a credit history or a relationship with a financial institution, so we recommend going the traditional route and opening up a checking account at your bank or credit union of choice.”
This view is echoed by John Ulzheimer, president of consumer education at SmartCredit.com, who told Fox Business Network in January that while fees for SpendSmart are comparably lower than others “that’s like saying my broken arm is not as bad as your broken arm.”
Having said all that, Bieber’s experience as a financial savvy teenand immense popularity with teens could make SpendSmart’s decision to hitch their star the best move they ever make.
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