Credit and Debit Card Ratings

Prepaid Debit Card Fees Lower Than Checking Account Charges

A recent report by Bretton Woods, Inc. shows that most consumers using prepaid debit cards to manage finances do so for less than $7.50 per month.

by Chris Warren

It has long been an assumption that users of prepaid debit cards turn to them as something of a last resort. But a recent report entitled, “Analysis of General Purpose Reloadable Cards,” found that the majority of consumers using prepaid debit cards are actually faring better when it comes to fees than if they were utilizing more traditional checking accounts. In fact, the report produced by Bretton Woods, Inc. reveals that the majority of people using prepaid debit cards to manage their finances were able to do so for monthly fees totaling less than $7.50, a cost advantage over basic checking accounts.

The report, which used data gathered from prepaid debit card issuers and program managers, underscores two trends driving the explosive growth of prepaid cards. An important force behind lower prepaid debit card fees is increased industry competition. As large financial services companies like Chase and American Express have introduced products with low fees, competitors have had to follow suit. At the same time, fees associated with checking accounts have been on the rise.

“The three-year trend shows that the costs of basic checking accounts are increasing while the costs to use general purpose reloadable cards, also known as prepaid debit cards, are decreasing. The 2013 analysis is able to pinpoint with more accuracy what it costs the majority of consumers to use their cards and revealed the high fees incurred by consumers are from outlier cards only and are completely avoidable,” says the report’s author, Michael Flores, who is president of Bretton Woods, Inc.

The report found that consumers using basic checking accounts pay between $263 and $473 each year in fees. By contrast, those who utilize reloadable prepaid cards with direct deposit pay between $58 and $263.95 each year. Prepaid debit card owners who don’t take advantage of direct deposit, which is typically a free way to load accounts with money, spend between $58 and $333.75 annually. Additionally, the report says that direct deposit checking accounts cost on average more than twice that of prepaid debit cards with direct deposit.

Another finding of the study underlines the growing popularity of prepaid debit cards with banks. Indeed, almost 60 percent of all banks now offer them. Given the embrace of prepaid debit cards by younger consumers, it’s likely that even more banks will begin offering their own cards. “The trends are unmistakable. General purpose reloadable prepaid cards are serving the needs of Gen Y and the underbanked, and also gaining a foothold with traditionally banked customers,” says Kirsten Trusko, President and Executive Director of the Network Branded Prepaid Card Association.

Author: Chris Warren

  • Prepaid Debit Card Fees Lower Than Checking Account Charges

    Prepaid Debit Card Fees Lower Than Checking Account Charges

    A recent report by Bretton Woods, Inc. shows that most consumers using prepaid debit cards to manage finances do so for less than $7.50 per month.

    by Chris Warren

    It has long been an assumption that users of prepaid debit cards turn to them as something of a last resort. But a recent report entitled, “Analysis of General Purpose Reloadable Cards,” found that the majority of consumers using prepaid debit cards are actually faring better when it comes to fees than if they were utilizing more traditional checking accounts. In fact, the report produced by Bretton Woods, Inc. reveals that the majority of people using prepaid debit cards to manage their finances were able to do so for monthly fees totaling less than $7.50, a cost advantage over basic checking accounts.

    The report, which used data gathered from prepaid debit card issuers and program managers, underscores two trends driving the explosive growth of prepaid cards. An important force behind lower prepaid debit card fees is increased industry competition. As large financial services companies like Chase and American Express have introduced products with low fees, competitors have had to follow suit. At the same time, fees associated with checking accounts have been on the rise.

    “The three-year trend shows that the costs of basic checking accounts are increasing while the costs to use general purpose reloadable cards, also known as prepaid debit cards, are decreasing. The 2013 analysis is able to pinpoint with more accuracy what it costs the majority of consumers to use their cards and revealed the high fees incurred by consumers are from outlier cards only and are completely avoidable,” says the report’s author, Michael Flores, who is president of Bretton Woods, Inc.

    The report found that consumers using basic checking accounts pay between $263 and $473 each year in fees. By contrast, those who utilize reloadable prepaid cards with direct deposit pay between $58 and $263.95 each year. Prepaid debit card owners who don’t take advantage of direct deposit, which is typically a free way to load accounts with money, spend between $58 and $333.75 annually. Additionally, the report says that direct deposit checking accounts cost on average more than twice that of prepaid debit cards with direct deposit.

    Another finding of the study underlines the growing popularity of prepaid debit cards with banks. Indeed, almost 60 percent of all banks now offer them. Given the embrace of prepaid debit cards by younger consumers, it’s likely that even more banks will begin offering their own cards. “The trends are unmistakable. General purpose reloadable prepaid cards are serving the needs of Gen Y and the underbanked, and also gaining a foothold with traditionally banked customers,” says Kirsten Trusko, President and Executive Director of the Network Branded Prepaid Card Association.

  • Girl Scouts Embrace Prepaid Cards

    Girl Scouts Embrace Prepaid Cards

    A Girl Scouts chapter strikes a deal with prepaid card company, SpendSmart Payments.

    by Chris Warren

    Thin Mints, Samoas, Tagalongs and Lemonades are definitely not financial terms. Yet the truth is that, aside from fundraising, one of the main reasons Girl Scouts from across the country sell these and other varieties of cookies is to learn something about money management and running a business. Think about it: Successfully selling hundreds or thousands of cookies requires smart marketing and sales strategies, wise inventory management as well as record keeping and order tracking.

    While involvement with the organization’s sprawling cookie business is certainly one way for young girls to become more financially aware and savvy, one Girl Scouts chapter has gone a step further. In October the Charlotte, North Carolina-based Hornets’ Nest chapter announced that it had established a partnership with SpendSmart Payments Co., a financial services outfit and prepaid debit card issuer based in San Diego, California.

    According to a recent story in The Kansas City Star, SpendSmart is crafting a financial education program that will be offered starting in January of 2014 to the 16,000 girls in North and South Carolina who make up the Hornets’ Nest chapter. With materials designed to appeal to girls from kindergarten through high school, the curriculum being developed by SpendSmart is meant to help girls understand the value of money and credit, as well as learn how to budget and use plastic wisely.

    “That last point of emphasis caught my attention,” Kansas City Star reporter Steve Rosen wrote. “As part of its partnership, Scouts 13 and older can sign up for the SpendSmart Prepaid MasterCard.”

    It is understandable why SpendSmart would be eager to become well known by thousands of young girls. The company offers prepaid debit cards specifically designed for teens and parents. Among other features, SpendSmart cards alert parents via text or email whenever a purchase is made, allowing them to monitor how well (or poorly) kids are spending money.

    Rosen points out that SpendSmart charges a $3.95 monthly fee, an amount that is both far higher and lower than other prepaid debit cards. He also notes that prepaid cards like those offered by SpendSmart also charge for withdrawing money from an ATM, replacing a card and checking an account balance. “The upshot: Whether it’s SpendSmart or some other prepaid debit card, weigh the costs against the services provided and decide on the best deal.”

    SpendSmart certainly hopes the Girl Scouts like the cards and the information they’re offering. The company hopes the deal with the Hornets’ Nest chapter is the first of many partnerships with the Girl Scouts.

Credit and Debit Card Ratings