Pre-paid cash cards are coming back, this time with the backing of
America Online , which took the wraps off its new AOL Cash Card for teenagers Tuesday as part of its unveiling of the AOL 9.0 client.
The ISP said the new feature is for teenaged members, but has to be set up by their parents. It will be available when the latest version of AOL, “9.0 Optimized” is released later this summer.
With no annual fees or charges, the AOL Cash Card is neither a debit card nor a credit card. Instead, it’s kind of an allowance, loaded on a plastic card, that kids can use both offline and online.
When the new card arrives, it will hit a market landscape that was once littered with failed e-cards aimed at teens. Start-ups such as eWallet and ICanBuy.com, which offered a similar service that let parents use their credit cards to fund prepaid spending accounts for their children, fell by the wayside during the dot-com shakeout. Others, like RocketCash, managed to survive but they allow users to purchase only from a select number of sites.
In AOL’s case, it has some marquee names helping to back the concept,
including a partnership with Visa to develop the cash card program based in
part on Visa’s BUXX program, a similar pre-paid card for parents of
teenagers. BankOne, one of the largest issuers of Visa cards, is also issuing the
cards.
The AOL Cash Card program is but one part of the ISP’s multi-pronged
strategy of layering exclusive content and free, add-on services into its
upcoming upgrade to differentiate itself from other ISPs. The
offers come at a critical time for AOL, when households are increasingly
switching from dial-up connections to faster, high speed connections and as
it manages a plan to capture more broadband customers while hanging on to
its dial-up base.
This way, parents that enjoy the Cash Card’s features, such as the
ability to set spending limits, track their teen’s spending and access
transaction histories through the online service might be persuaded to
continue with AOL’s service via “bring your own broadband” even if they
migrate from dial up to another broadband provider.
Additionally, pre-set cash cards are seen as an effective way to
teach kids how to work with a budget.
AOL said it decided to introduce the AOL Cash Card in response to
consumer interest in a product that offers families a way to educate teens
about money management skills at home.
Financial experts have long extolled the virtues of teaching children and
teenagers how to plan and stick to a budget in order to build a solid
financial history as an adult.
But in a recent survey by the Jump$tart Coalition for Personal Financial
Literacy, which is working with AOL on the Cash Card rollout, 68 percent of
a high school seniors failed a multiple-choice test that covered basic
financial knowledge.
Other findings of the survey, which polled a sample of 480 parents with teenagers in two surveys, said that nearly all parents of 13-17 year
olds who also use the Internet (96 percent) think it is very important that
they talk to their teens about money management skills.
Not surprisingly, more than two-thirds of the survey participants
suggested that they were
interested or somewhat interested in a pre-paid card that their parents
could load with money and manage through the Internet.
The new cards hope to combine two very powerful trends in commerce: the
growing spending power of teenagers and the explosive popularity of online
shopping.
According to Teenage Research Unlimited, U.S. teenagers spend an average
of $101 a week. Jupiter Research (whose parent company owns this
publication), estimates that teens in the 13-18 range accounted for $5
billion worth of online spending in 2002, which is expected to increase to
$13.2 billion within three years.
