Prepaid Debit Card Reviews, Complaints, Etc

Author: Chris Warren

Debit Cards Reduce Crime

Long before the debate around the wisdom and fairness of using prepaid debit cards to pay employee salaries began, recipients of welfare and food stamps made the switch from paper checks to plastic. A new study has found that the transition yielded this surprising result: Debit cards reduce crime.

A recent story in The Chicago Tribune highlights research conducted by Richard Wright, a University of Missouri at St. Louis criminology professor. What Wright and his team of researchers discovered is that replacing paper checks that recipients – many of whom did not have bank accounts – had to cash at check cashing outlets with debit cards reduced the overall crime rate in Missouri by almost 10 percent.

“We saw this astounding reduction; we were surprised ourselves,” Wright told the newspaper. “Name a policing strategy that led to 10 percent reduction in overall street crime?”

Once explained, the reason for this dramatic drop in crime seems obvious. Recipients of paper checks who went to check cashing stores walked out with cash in their pockets. Having a sizable amount of cash on them made them prime targets for robbers. The introduction of debit cards, says Wright, took a lot of that cash out of circulation and made people less vulnerable to crime. Indeed, Wright’s study found that burglary, assault and larceny fell by 7.9 percent, 12.5 percent and 9.6 percent, respectively.

Wright’s study is the first of its type and he now hopes to expand his research to see if the substitution of debit cards for welfare checks has had the same impact nationally.

April 15, 2014
Bankrate Surveys Prepaid Cards
One indication of the mainstreaming of prepaid debit cards is the amount of attention these once fringe financial products are attracting from the media. The most recent example of that is an in-depth survey of the fee structures of 30 prepaid cards by Bankrate.com, a leading personal finance website.

Released on April 7^th, Bankrate’s analysis of the leading prepaid cards finds a wide range in the types and levels of fees charged. “Not all prepaid cards are created equal,” says Greg McBride, the chief financial analyst for Bankrate. “Some have many fees, some have few; some will waive or reduce monthly fees, others won’t; some permit free in-network ATM withdrawals, others don’t.”

Bankrate’s evaluation of prepaid cards comes in the wake of research earlier this year by the Pew Charitable Trusts that found that even though prepaid cards are rising in popularity, consumer protections remain limited. Which is one reason why analysis of card fees by the likes of Bankrate is so important in order to arm consumers with the information they need to make smart choices.

Among Bankrate’s findings were:
- Activation fees are still common, with over 50 percent of the cards surveyed charging between $2.95 and $9.95.
- Monthly account fees are hard to avoid. Over 80 percent of the cards examined charged some sort of monthly fee, although a third either don’t have one or will waive it if enough money is deposited into an account.
- It’s best to find a card that has an ATM network. Of those that are affiliated with an ATM network, over 60 percent don’t charge for in-network withdrawals. Those that do, charge between $1 and $2.50 per transaction.
- Checking your account balance at an ATM is a bad idea. Almost 80 percent of the cards Bankrate looked at charge a fee, as high as $3, for this basic information.
- Paying your bills is free. None of the 30 cards Bankrate looked at charged a fee for their bill pay function.
- Find another card if yours charges a point of sale fee. These are a rarity now, with only 17 percent charging for PIN transactions and 7 percent for signature purchases.
April 9, 2014
Wal-Mart Sues Visa

Call it clash of the titans. On March 28^th Wal-Mart Stores, the largest retailer in the world, filed suit against Visa, alleging that the credit card company had cost it $5 billion. At issue for Wal-Mart is its charge that Visa conspired with other banks to artificially elevate the so-called “swipe fee” charged to process every credit or debit card transaction. Wal-Mart is seeking a total of $15 billion in damages.

Wal-Mart’s lawsuit, which was filed in the US District Court of Western Arkansas, is just the latest chapter in what has been a bitter and protracted feud between two sides who heavily depend on one another. Just a week before Wal-Mart filed its lawsuit, retailers were handed a defeat when the US Appeals Court for the District of Columbia overturned an earlier court decision that required the Federal Reserve to recalculate and lower its 21-cent per transaction cap on swipe fees. The ruling meant that swipe fees would continue to have a 21-cent ceiling.

The ongoing battle over how much banks should be able to charge stores for processing a debit card purchase began after the 2010 passage of the Dodd-Frank Consumer Protection and Wall Street Reform Act. Under the Durbin Amendment of that legislation, the Federal Reserve was tasked with formulating regulations that would result in swipe fees that reflected the actual costs to banks of processing a payment. Initially, the Federal Reserve proposed a cap of 12 cents, though it later revised it upwards to 21 cents. Before the passage of the Durbin Amendment and the Federal Reserve’s calculations the average debit card swipe fee was about 45 cents.

April 2, 2014
Retailers Lose In Latest Debit Card Swipe Fee Ruling

Few consumers know that there is a heated battle going on about the fees charged every time you swipe your debit card. It’s a conflict between big banks and large retailers, two politically influential and well-moneyed groups, about the current cap on debit card swipe fees. The latest round of this years-long battle was a victory for the banks.

On March 21 the US Appeals Court for the District of Columbia overturned a lower court’s July decision that ordered the Federal Reserve to recalculate and lower its 21-cent per transaction cap on the fees charged for processing a debit card payment. Retailers cheered that decision and expressed optimism that the so-called debit card swipe fee would be reduced to as low as 12 cents. This latest ruling means that the swipe fee cap will remain at 21 cents per transaction.

The imbroglio over how much banks should be able to charge stores for processing a debit card purchase began after the 2010 passage of the Dodd-Frank Consumer Protection and Wall Street Reform Act. Under the Durbin Amendment of that legislation, the Federal Reserve was tasked with formulating regulations that would result in swipe fees that reflected the actual costs to banks of processing a payment. Initially, the Federal Reserve proposed a cap of 12 cents, though it later revised it upwards to 21 cents. Before the passage of the Durbin Amendment and the Federal Reserve’s calculations the average debit card swipe fee was about 45 cents.

Seeking to lower the cap even more, the National Retail Federation (NRF) and other groups filed an appeal in federal court in 2011, which eventually resulted in last summer’s ruling. Naturally, the NRF was disappointed in the court’s latest ruling. “The Fed ignored congressional intent and worked to shield debit card companies and big banks. A self-described victory for the banks usually results in higher costs for consumers,” says Mallory Duncan, NRF’s senior vice president and general counsel. NRF and its allies are considering whether to appeal this latest ruling.

By contrast, the American Bankers Association applauded the ruling but remained critical of the establishment of a swipe fee cap in the first place. “While this decision is a welcomed outcome, the fact remains that the underlying policy – the Durbin Amendment – has not accomplished its goal of lowering prices for consumers. It has only served to increase the bottom line for big box retailers,” says ABA president Frank Keating. This is a battle that seems likely to continue.

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 …

March 26, 2014
Sing A Song For Financial Literacy

From its origins as a quirky way to raise money to start a business, crowdfunding has quickly become one of the go-to methods for entrepreneurs who need cash to turn their ideas into reality. Crowdfunding has become so sufficiently mainstream that Entrepreneur now has an annual listing of the top 100 crowdfunded companies, which includes a business (Ouya, a video game console maker) that raised a staggering $8.6 million on the crowdfunding site Kickstarter. Now crowdfunding is being tapped to promote financial literacy in young children.

Last month author and entrepreneur, Sam Renick, launched an effort on Indiegogo.com to raise $85,000 to develop an interactive website that uses music to teach kids four and older good financial habits. Renick says the website, which will be called the Dream Big Set Goals Resource Center and will feature the cartoon character Sammy Rabbit, will include videos, activities and games. Renick says that his website, should it get the necessary funding, will be the first to use music to teach young kids good financial habits.

Renick says he was inspired to launch a website designed for young children, at least in part, because of research that underscores the importance of starting financial education very young. Indeed, Renick points to a study released last year by University of Cambridge researchers that concluded that adult money habits are largely formed by the age of seven. This includes the important ability to delay gratification and plan ahead for purchases.

The website’s focus on music as a learning tool is inspired by the effectiveness of campaigns such as Schoolhouse Rock, which used music and animation to teach children about subjects as complicated as how a bill becomes a law. Besides the website, Renick says that if he raises $85,000 he will also distribute 10,000 CDs to kindergarten through third grade classrooms worldwide. With 18 days remaining in the fundraising effort, Renick had raised a little over $1,500.

March 20, 2014
Chase Liquid Adopts Disclosure Recommendations

Chase has adopted consumer-friendly disclosure recommendations for its Chase Liquid prepaid card. At the same time that the Pew Charitable Trusts unveiled detailed suggestions about the types of fees and other disclosures all prepaid debit card issuers should make available to consumers, Chase announced that it would do exactly what Pew advised.

The popular Chase Liquid prepaid card became the first product to follow Pew’s road map, which was released in hopes of making it easier for shoppers to choose between quickly multiplying prepaid card options. Although prepaid cards have seen a steady and sharp rise in popularity over the past few years, Pew notes that there are no legal or regulatory requirements that card issuers must follow when it comes to disclosures about fees, terms and conditions. Pew has also found that only 32 percent of consumers actually compare card terms before selecting one.

By quickly implementing Pew’s disclosure suggestions, Chase may very well be grabbing a competitive advantage in the increasingly cutthroat fight for prepaid card customers. It also doesn’t exactly hurt Chase’s reputation among lawmakers, including US Senator Mark Warner, who recently introduced legislation to compel financial institutions to more clearly disclose fees related to their prepaid cards. “I commend Pew for their work on this issue and Chase for being the first prepaid card provider to adopt the disclosure box for their cards, which I proposed making standard for the industry in my legislation,” says Warner.

The Chase Liquid disclosure form is attached to the packaging that comes with the physical card. The box includes information on a wide range of fees – although many don’t apply to Chase Liquid – including charges to get cash back from a purchase, a monthly account maintenance fee and the charge for calling a customer service telephone number.

For its part, Pew hopes that Chase is just the first of many prepaid card issuers to follow its disclosure recommendations. “Pew’s research shows that inconsistent disclosures make it difficult to understand the fees associated with each prepaid card,” says Susan Weinstock, director of Pew’s safe checking research. “Terms should be plainly stated so that consumers can make fully informed financial decisions. Chase is taking an important step toward making these cards more beneficial and we hope other providers will follow.”

March 12, 2014