Prepaid cards are becoming a more popular form of plastic for folks without checking or bank accounts.
And while marketing campaigns for many prepaid cards may promise "No Hidden Fees" or the ability to "Bank On Your Own Terms," the terms being granted often are in favor of the issuer and most include steep fees, in small print, if not hidden.
Prepaid card consumers should be careful, according to a new report conducted by Consumer Union, the nonprofit publisher of Consumer Reports. Confusing and expensive fee policies are common among such cards, according to attorney Michelle Jun, who authored the report along with the Consumer Federation of America and the National Consumer Law Center, on behalf of its low-income clients. Also, the cards do not protect consumers from fraud the way a credit or debit card can.
"Consumers using prepaid cards end up paying a mountain of costly fees that can add up quickly," Jun said in a statement accompanying the report. "[Also] these cards might leave them vulnerable if lost or stolen."
You Want Fees? We Got 'Em
Activation Fees. 17 of the 18 prepaid cards charged a fee for getting started. The Millenium Advantage Card, for example, charges $99.95 in application and initiation fees.
Monthly Fees. Although sometimes this fee can be waved (if, for instance, direct deposit is established), 15 of the 18 prepaid cards charged a monthly fee, some as high as $10.