Controlling spending

This card lets parents monitor what their kids are buying.
By Avrum D. Lank
Knight Ridder Newspapers
Like many teenagers, Cassandra Bess whips out plastic when she goes to the mall to buy CDs, makeup and clothes. But her card is different -- it has technology that lets her parents monitor and control how she spends her allowance.
In an increasingly cashless and computer-driven society, an Arizona company with Midwestern roots has introduced a debit card with V-chip-like computer controls, letting parents set daily, weekly or monthly spending limits, review statements and even select where it can be used. For example, parents can make sure their children's debit cards work at gas stations but not liquor stores.
The Bess family of Suamico, near Green Bay, Wis., is one of only about 300 nationwide using the product, called the Allow Card. Fifteen-year-old Cassandra is a believer.
"It is a way to teach me about money," said the sophomore at Bayport High School outside Green Bay. "It's really neat and a lot easier than carrying money around."
Michael Bess, her father, heard about the card from friends about a year ago.
"I thought it was kind of interesting," said Bess, 50, who is a material handler at a paper mill. "When I was younger, being on my own, I got in trouble with money flow."
Avoiding problems
Being able to help Cassandra track her expenses is a good way to help her avoid the same problems, he said.
If, by the 20th of a month, Cassandra has overspent her allowance, the Allow Card Web site lets the family review the records and figure out why, added her mother, Carol, 46, who is a nurse. So far, the Bess family has not used the parental controls included with the card.
"We told her, 'What you are doing is on your honor,' and so far we haven't had a problem," Michael Bess said.
Attempts to launch similar cards have fizzled in the past, but the designers of the Allow Card think they have found a way to make their offering succeed -- by marketing it through interest groups such as PTAs while splitting the fees it generates up a chain of distributors. The card costs $20 to activate and $3.50 a month.
One of the first groups to sign on to the program is Milwaukee-based Pi Sigma Epsilon, a marketing fraternity with 2,200 members at 50 college chapters nationwide.
Selling the card will help Pi Sigma members learn how to develop and maintain customers, said Ann Devine, executive director of the organization. "And we thought it would be a good fund-raising project," she added.
The inventors
The card is the brainchild of Tom Smith and Marla Beans, who live in the Phoenix area. Both were working in the credit card industry when Beans' teenage daughter overspent her debit card and did not tell her mother right away.
The bank charged overdraft and late fees, eventually totaling several hundred dollars, Smith said.
At the time, Smith was servicing some heavily used automated teller machines in high schools where many of the students did not have cards of their own.
The two experiences got him wondering, "What would happen if we came out with an allowance card for kids?" he said.
Smith and Beans decided to develop a debit card for teens with a fixed amount of value that could not be overspent. Working with a card processing company in Texas, they also developed software that lets parents set limits. They raised $1.2 million from about 10 investors to start a company two years ago, forming Allow Card of America Inc. in Mesa, Ariz.
The first model of the card required the user to enter a personal identification number to make a transaction, but that feature was a problem, according to Frances Baldasari, a retired schoolteacher in Gwinn, Mich., and director of Allow Card for that state and Wisconsin.
No pin number
Many merchants, especially in rural areas such as those around her home in the Upper Peninsula, were not equipped to take such transactions. So late last year, Allow Card teamed up with MasterCard to put out a product that can be used without a PIN, like any credit card.
That has helped a lot, said Baldasari, 67. A marketing campaign through newspapers and Web sites is scheduled to start later this year, said Smith, who is originally from Illinois.
Baldasari joined the venture when friends introduced her to Smith and Beans during a trip to Arizona. It did not hurt that Beans originally is from the Upper Peninsula.
The educational aspects of the card appealed to her, Baldasari said. In addition to providing financial information and controls, the Allow Card Web site has lessons in personal finance designed for teens.
Now, Baldasari is recruiting people to sell the card to organizations in her territory.
"There have been attempts before by credit card issuers to issue cards with parental controls on them," said Daniel Ray, editor in chief of Bankrate.com in North Palm Beach, Fla., who had not heard of the Allow Card until asked about it by a reporter. "The first wave went out in year 2000 and weren't a sweeping success."
Today, Visa offers a debit card aimed at teens through banks called Visa Buxx. It allows parents to see how the money is being spent but does not give them the ability to block its use at particular stores, said Steve Dale, spokesman for U.S. Bank in Minneapolis, which is involved with the Visa Buxx program. Fees are lower than for the Allow Card, however.
Fees are always an issue with such cards, said Ray, whose firm tracks the credit card industry.
"Maybe you can control who puts their hands in your child's pocket, but you have to look out for who puts their hands in your pocket," he said.
Michael Bess is aware of the fees, including some for transferring money from his credit card to Cassandra's Allow Card. But he and Carol believe they are worth it for what it can teach their daughter.
"It is for parents that want to show their kids that they have a good handle on their finances," said Carol. "We don't use our credit card and max it out; we have got good financial stability.
"This is a way for us to help her, to say, 'You have the money, you have to manage it a little bit."'