Prepaid Debit Cards Are Still Charging You Fees


NEW YORK (MainStreet) — The prepaid debit card marketplace shifts constantly, but 83% of prepaid debit cards still charge monthly fees, according to a recent survey.

While new cards appear constantly in the market and others are altered often,'s survey of 30 widely held prepaid cards found that while all charge fees, the specific fee structures vary considerably. Out of those cards, 33% will waive the monthly fee if a certain amount is loaded on the card. Altogether half of the cards either have no monthly fee or will waive it.

"Not all prepaid cards are created equal," said Greg McBride, chief financial analyst for

The fees leveraged by prepaid companies can add up quickly since many optional transactions require additional costs. The survey found that 53% of cards have activation fees ranging from $2.95 to $9.95, depending on where it is purchased with only 10% which do not charge an activation fee if the card is purchased online or over the phone. Another 53% of cards charge for receiving account statements by mail with fees ranging from $1 to $5.95.

The most competitive offers are coming from banks and other financial service companies which offer greater fee transparency, lower fees and typically leverage the bank/branch ATM network for free cash withdrawals and reloads, he said.

Of the cards that are affiliated with an ATM network, 64% do not charge for in-network withdrawals. The range is $1 to $2.50 among those that do. All 30 cards assess a fee ranging from $1.95 to $3 for going outside the ATM network.

Checking the card balance at an ATM will typically cost you since 77% of the cards charge a fee between $0.45 and $3 and only 10% do not charge for balance inquiries at any ATMs.

Point-of sale fees are rare with only 17% of companies which charge a fee for PIN-based transactions ranging from $0.95 to $2, although an additional 7% don't permit PIN transactions.

Receiving a monthly statement may not be cost effective since 53% charge for receiving account statements by mail with fees ranging from $1 to $5.95.

Even customer service calls are not free with 27% of cards which charge a fee, an increase of 17% from last year. The fees range from $0.50 for checking your balance to $4.95 for using the call center to transfer cash between accounts.

More than three in four or 77% do not charge for declined transactions under any circumstances, while 10% charge either $1 or $2 for transactions declined at an ATM.

The inactivity has dropped down to only 17% of the cards that surveyed, a decrease from 29% last year. Among those that charge the monthly inactivity fees range from $1.95 to $5.95.

Consumers are still using prepaid cards to load their vacation money on them, which allows them to avoid the "hangover of debt" afterwards, McBride said. Many parents use them so that their children have cash during summer camp or college.

Prepaid cards remain popular because there are many consumers who still lack a traditional bank account, he said.

"The cards are a way for companies to reach out to a customer segment that is currently unbanked," McBride said. "There is a wide variation in the terms that are available. You have to shop around."

The cards which contain celebrity branding are popular among the teen segment, but are the worst ones to purchase, he said.

Prepaid cards should supplement the traditional banking structure, not replace it, McBride said. Consumers need to open a bank account to garner savings for the future.

"A prepaid card may be a solution for people who have problems with overdrafts and can't get a bank account," he said. "Your goal needs to be to get yourself into a traditional banking system."

Prepaid debit cards can be an alternative for consumers who have had trouble establishing or improving credit. The survey shows a cross section of what's available in the marketplace today and key provisions of each card. Click here to check out the options and fees for the 30 cards featured in the survey.

General purpose prepaid card payments have been the fastest-growing non-cash payment method in the U.S. for the last several years, said Fitch Ratings, citing payments data provide by the Federal Reserve.

Between 2009 and 2012, the number of prepaid card transactions grew by an annual rate of 33.5%, far outstripping similar rates for other types of non-cash payment. The total number of prepaid card transactions reached 3.1 billion in 2012, 1.8 billion more than 2009. Private-label prepaid cards also posted strong growth, up 9.7% annually over the same period.

The fees and expiration dates instituted on prepaid cards has garnered the attention of the Consumer Financial Protection Bureau (CFPB). The CFPB is targeting May 2014 for proposed regulation on prepaid cards.

Consumers remain fans of prepaid cards because they are convenient, said Matt Schulz, senior industry analyst for, the Austin-based website listing credit card offers.

"It allows them to control their spending because it is not a credit card," he said. "One way you can save money is to shop around and look online at the fee structure before purchasing it in a grocery or convenience store. Generally speaking, they are cheaper online."

--Written by Ellen Chang for MainStreet

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