Prepaid Cards: Beware of High Fees


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

After evaluating 18 prepaid cards (which are listed below), the report's findings included some of the following fees:

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.

ATM or Cash Withdrawing Fees. All cards charge some fee for ATM use, sometimes as much as $2.50. 17 of the prepaid cards will also charge you up to $1 for balance inquiries, and these charges do not factor in the ATM owner's own fees.

Inactivity Fees. Eight of the pre-paid cards charge a fee when you don't use your card for a period of time. Not using your Exact card this month? That will be $9.95, please.

The Fees add up: According to the report, a new Rush Card user whose first month card use included three ATM withdrawals, two deposits, three bill payments and eight regular purchases would pay $43.75 in fees.

Also, prepaid cards generally do not carry the same level of fraud protection as do ATM and credit cards. FDIC protection is not guaranteed.

The 18 cards evaluated in this report include: Eufora, First Vineyard, Vision Premier, Western Union and Wired, all issued by Bancorp; SVC Revel issued by First Bank and Trust; WalMart Money Card, issued by GE Money Bank; Rush Card, issued by Manufacturers and Traders Trust Company; H&R Block Emerald Card, issued by H&R Block Bank; AccountNow, Bank Freedom, BuyRight, Espree, Exact, NetSpend Visa, ReadyDebit, all issued by MetaBank; Millenium Advantage, issued by New Millenium Bank; and nFinaSe, issued by Palm Desert National Bank. A complete copy of the report is also available.

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