A Prepaid Card for Recovering Addicts

If you've ever had a recovering addict in your life--be it from drugs, gambling, or another vice--you know giving him or her money can be a squeamish proposition. Will the money be spent the way you hope, or will it end up at neighborhood liquor store?

Such a dilemma may leave you intrigued--or perplexed--about the Next Step Prepaid Mastercard, the first prepaid card designed for recovering addicts. It allows a caregiver to put money onto the card, and then monitor how the money is spent. Is it a godsend? An insult for someone trying to regain somebody's trust while they reassemble the pieces of their life? Or maybe it's exploitative, given the $14.95 monthly maintenance fee.

Launched last fall, only to experience technical hiccups and be re-launched in December 2012, Next Step is a natural progression in the niche markets prepaid card issuers have been exploring. For instance, MasterCard's BillMyParents card allows parents to put money on a prepaid card for their teenager, which they can monitor and use to teach their children responsible spending habits.

Next Step takes the concept of parenting and teaching responsible credit card use to the next level: It's essentially a prepaid card for the adult child who still needs some hand-holding and guidance.

[Read: The Best Prepaid Cards for Every Type of Consumer.]

Origins of the card. Next Step's three founders, Eric Dresdale, Ryan Jaffe, and Louis Fisher, describe themselves as recovering addicts. Their Achilles' heel? Painkillers.

Dresdale, a 29-year-old who lives in Palm Beach County, Fla., had a successful career in commercial real estate. He drank too much, but it was opiates that were his downfall. After spending four months at a treatment center in Florida, Dresdale still had to lean on his parents for financial support.

"My family was freaked out every time they had to send me money," says Dresdale. His mother had good reason to worry. Dresdale didn't relapse, but he spent his parents' money poorly, buying things he didn't need to help mask his feelings of insecurity and inadequacy.

It was during this time, the spring of 2011, that Dresdale, Jaffe, and Fisher conceived the idea of a prepaid card for addicts. It took a while, but Dresdale and his two friends-turned-partners eventually convinced Mastercard of the merits.

How the card works. The Next Step card can't be used in liquor stores, night clubs, casinos, or other miscellaneous businesses such as tattoo parlors, body-piercing establishments, escort services, or pawn shops.

"So what?" a skeptic might think. "He'll just go to the ATM and take out money and buy whatever he wants."

But the card can't be used to withdraw cash from ATMs or stores that have point-of-sale terminals that ask if the consumer would like extra cash back. Additionally, the card's guardian can get real-time spending notifications and receive monthly and quarterly reports to get a bigger picture on how the money is being spent.

Caregivers can also set daily spending limits, as well as put a lid on monthly transactions--say, no more than $20. For instance, if parents think their 24-year-old doesn't need to buy a Peppermint Mocha Frappuccino from Starbucks every day, a monthly cap can prevent that.

Or if you don't want the cardholder to spend more than, say, $15 per purchase, you can cap each transaction. The user's photo can be printed on the card, which should prevent a recovering addict from selling or trading the card with someone else.

Those safeguards don't mean the prepaid card can't be misused. Shauna Acquavita, an assistant professor at the School of Social Work at the University of Cincinnati, says, "While it may make the family member think they have a sense of control over the money they provide to a person in recovery, if a person wants to use, they will find a way, whether it is exchanging food for drugs, buying mouthwash with alcohol in it at the drugstore to drink, and so on."

Dresdale agrees. "Nothing is 100-percent foolproof, and we don't tout ourselves as a panacea for addicts," he says. "We've tried to create this to give as much accountability as we can and to be the best option out there, but if somebody doesn't want to use this, they don't want to use this. We don't want to be considered a relapse-prevention tool."

[Read: Get-Out-of-Debt Resolutions for 2013.]

Will it work? Next Step is too new for a groundswell of success stories. Only about 40 people throughout the country are using the card, but a number of professionals who work in addiction seem hopeful about its utility.

Says Jonathan Alpert, a New York City psychotherapist and author of Be Fearless: Change Your Life in 28 Days, "The card has its benefits ... It does help to control negative behavior." But Alpert is concerned that the card might create a false sense of confidence and set someone up for a relapse later, when they resume spending their own money.

That dovetails with concerns Acquavita has. Prepaid cards don't improve credit scores, which, she says, "is often what people in addictions need after facing financial issues." She also isn't crazy about the fees, of which there aren't many, but there are some. For instance, it does cost $2.95 to talk to a live agent.

On the other end of the spectrum is David Sack, an addiction psychiatrist and CEO of Promises Treatment Centers, who believes the card could be just what the doctor ordered.

"Parents and loved ones often try to help the recovering addict get back on their feet by providing financial assistance, which in a moment of weakness gets spent on drugs and alcohol," says Sack. "The Next Step [prepaid] card could give those who want to help a way to provide support without enabling and, at the same time, help recovering addicts develop life skills, which is particularly crucial in the difficult early stages of recovery. While there is no fail-safe tool that can prevent relapse, this card will provide those who are motivated to stay sober and become financially independent with some of the information and tools they need to do so."

[Read: The 5 Best and Worst Prepaid Cards]

About that fee... As noted, the card comes with a $14.95 monthly maintenance fee. There is also a $9.95 purchase and activation fee, as well as other miscellaneous fees. For example, it costs $0.75 to transfer money from your bank account, yet it's free to load it from your debit or credit card.

"Most prepaid cards make their revenue off of their ATM fees, and we don't have that," says Dresdale. "They can't cash out of the card in any respect, so our revenue has to come in a different way."

It's also worth noting that the fees aren't paid by the recovering addict. The charges come out of the money on the card, which is presumably funded by a guardian. Either way, parents and those recovering from a long descent into an addiction probably feel that for years, they've been throwing their money into a matrix of vices and bad decisions. For some hopeful parents, spending approximately $15 a month is a small, irrelevant fee to help put a loved one back on track and make sure the monthly budget doesn't fall into a drug dealer's hands.