Prepaid Debit Card Reviews, Complaints, Etc

Author: Lucy Lazarony

  • What is A Prepaid Debit Card? Glossary & Common Terms

    What is A Prepaid Debit Card? Glossary & Common Terms

    Welcome to our site! Our editors have been covering the credit and debit card space for a total of 30+ years and we are proud to have been featured by the Wall Street Journal, CNN, etc. Your input is invaluable and we’d love to have your comments on What is a Prepaid Debit Card? (see below) – this site is powered by you!

    Courtesy of Linda Sherry, Director of National Priorities for Consumer Action, here is a comprehensive list of fees associated with prepaid debit cards.

    by Lucy Lazarony

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    What is a Prepaid Debit Card? Glossary and Common Prepaid Debit Card Terms.

    Purchase fee.  This is a one-time charge for buying the card, generally in a retail location.

    Activation fee.  A one-time charge that is also known as an opening fee, initial load fee or set-up fee, can range from free to $30 or more. This is a fee that must be checked carefully, particularly if you also have to pay to buy the card (see purchase fee above).

    Monthly “maintenance” fee. This is a common fee that can vary widely, up to $10 per month; may be reduced or waived if monthly reload minimum is met or you set up direct deposit; some cards may also charge an annual fee.

    Reloading fee. This fee is charged for adding funds to the card, which can vary by type or source of funds (cash, for example); third-party fees for cash loads made at agents (such as a participating chain of stores) also may apply.

    Funds transfer fee. This kind of fee may be charged on certain funds transfers, such as from one card to another or from a bank account to the card.

    Purchase transaction fee. This fee may be waived with a minimum number of transactions in the month or with direct deposit; may be charged on debit (personal identification number, or PIN) transactions and not on credit (signature) transactions, or vice versa.

    Click HERE for our current ratings of the Best Prepaid Cards including the Best Overall No Fee Visa Card and see how this card compares to others.

    Denied transaction fee. This fee may be charged if you try to make a purchase or an ATM withdrawal that exceeds your account balance.

    Overdraft (or shortage) fee. This type of fee is charged by the relatively few cards that will allow you to spend more than you have loaded on the card; typically ranges from $10 to $25 or more.

    Cashier withdrawal fee. This fee may be charged when cash is withdrawn at a bank or an agent location.

    ATM withdrawal fee. A fee charged for withdrawing money from an ATM (unless the card offers free withdrawals at participating ATM locations or a certain number of free ATM withdrawals per month); another, separate fee of $1 to $3 is taken by most ATM owners/operators.

    Balance inquiry fee. This fee may be charged for getting your balance statement at an ATM.

    Foreign currency conversion fee. This type of fee is charged if you use your card outside the U.S. (typical for credit and debit cards, too).

    Inactivity fee. This fee may be assessed if you don’t make at least one transaction in a certain period (typically 60 or 90 days).

    Card replacement/reissue fee. This fee may be charged if your card is lost or stolen.

    Paper statement fee. A type of fee charged for requesting a paper statement rather than viewing your statement online.

    Customer service fee. Some card issuers charge this fee when you contact a live customer service representative (as opposed to using the automated help system); some cards may even charge a small fee for using the automated phone system.

    Closure fee. This type of fee is charged when you close the card.

    Other Related Reviews and Resources That Might be Helpful:

    Click HERE for our current ratings of the Best Prepaid Cards including the Best Overall No Fee Visa Card and see how this card compares to others.

  • Hispanic Consumers Propel Prepaid Card Growth

    Hispanic Consumers Propel Prepaid Card Growth

    Hispanic consumers account for a growing segment of prepaid debit card users.

    by Lucy Lazarony

    Hispanic consumers have embraced prepaid debit cards. According to an August 2012 research study, “Consumer Payments in the U.S.: The Latino Market” by Packaged Facts:

    • There are 4.6 million Latinos who used a prepaid debit card in the last 12 months.
    • They make up 15 percent of all consumers using prepaid debit cards.
    • Between 2011 and 2012, the number of Latinos using prepaid debit cards increased by 7.2 percent from 4.3 million to 4.6 million.
    • It is projected that by 2017 the percentage of Latinos using prepaid cards will increase from 13.8 percent to 16.0 percent and the number of Latinos depending on prepaid debit cards will grow from 4.6 million to 6.3 million for cumulative growth of 35.8 percent.

    The principal source of primary data for the study is the Winter 2012 Experian Simmons National Consumer Study, which was fielded between February 2011 and March 2012.

    Prepaid debit cards targeting Hispanic consumers include the Univision MasterCard prepaid card and The Coopera Card, available through credit unions.

    Miriam De Dios, Chief Executive Officer of Coopera, says prepaid debit cards are good payment options for Hispanic consumers for several reasons.

    “A prepaid reloadable card provides safety, access to new payment methods, can serve as an alternative to check-cashing, buying money orders and using money transfers for the financially excluded and it can be a way to reduce payroll costs for small businesses,” De Dios explains. “However, this product needs to be culturally relevant to Hispanic cardholders and it needs to be a stepping stone into other financial products and services that can help consumers achieve their financial goals. Therefore, credit unions are well suited to offer this product as well as financial education, loans, etc. to help the consumer with more.”

    Likes and dislikes

    According to De Dios, the features of prepaid debit cards that Hispanics like most include being able to open the card without needing a credit history, being able to use the card internationally, and being able to obtain secondary cards for family abroad, and having cardholder support available and accessible in English and Spanish.

    Text message alerts, convenient loading options, and low fees are also popular with Hispanic consumers, De Dios says.

    Turnoffs for Hispanic prepaid debit card users include inconsistent Spanish availability of services and features and too many restrictions to open and obtain a card, De Dios explains.

    Des Moines Metro Credit Union has been offering The Coopera Card since January 2012. The bilingual support (phone and website) is great for our members,” says Traci Stiles, business development manager at Des Moines Metro Credit Union. “They also like the ability to load money from their account over the phone or in person at the credit union. They like to use the card for everyday purchases and online purchases. Also, they use it to pay bills.”

    Forging bonds

    Many Coopera Card users have other services at the credit union as well, Stiles says.  “I think most of our members who have a Coopera Card also have other services with us. We have a Credit Builder Loan that is very popular. Also, many people leave some money in their account for savings,” Stiles says.

    One of the aims of The Coopera Card is to build new financial relationships with Hispanic consumers, De Dios says.

    “We work with credit union issuers across the country and they are integrating this product with their overall product suite and promoting it locally through Spanish media, in an outreach capacity through financial educational opportunities and through partners. Credit unions are also including this in their toolkit as they build relationships with employers with a large number of Hispanic employees and Hispanic-owned businesses.”

  • Pros and Cons of Traveling with a Prepaid Debit Card

    Pros and Cons of Traveling with a Prepaid Debit Card

    Should you pack a prepaid debit card for your next trip?

    By Lucy Lazarony

    Going on a trip? Here’s a look at the advantages and disadvantages of traveling with a prepaid debit card in your wallet.

    An alternative to credit cards. If you don’t have a credit card or don’t want to travel with one, a prepaid debit card may be a good option, according to Robert Firpo-Cappiello, Executive Editor of Budget Travel.

    “Traveling with a prepaid debit card is preferable for travelers who do not want to use a credit card,” Firpo-Cappiello says. “Reasons for not using a credit card include a history of racking up charges and high interest (and) already having too many credit cards with high balances or balances at the limit.”

    Terry Maher, general counsel for Network Branded Prepaid Card Association, has sent each of his three children on travel adventures with prepaid debit cards. He monitors their spending and their locations online and adds funds as needed.

    “A credit card is probably just as convenient but do I want to give a credit card to a 22-year-old or a 20-year-old?” Maher says. “I can check their balances daily online.”

    Good for budgeting. A key advantage of traveling with a prepaid debit card is that it forces you to travel on a budget. The amount of money you have to spend on your trip is the amount of money you have loaded on the card, minus any fees you pay for using the card.

    “The major upside to traveling with a prepaid debit card is that you’ve established your budget and you have a tool that forces you to stick with it!” Firpo-Cappiello explains.

    Unlike a debit card tied to a bank account, with most prepaid cards you don’t have to worry about paying overage charges.

    “By using prepaid rather than a card tied to your bank account, you’ll avoid any overage charges,” Firpo-Cappiello says. “But, of course, that means you have to stick to your limit — no wiggle room.”

    Ease of use.  Prepaid debit cards are accepted at the same merchant locations as credit cards and debit cards tied to bank accounts.

    “Because you can use a prepaid debit card at the same places that accept credit and non-prepaid debit cards, it can be ideal for getting the best possible exchange rate and convenience in places, such as on a plane where the only accepted method of payment for snacks and entertainment is plastic,” Firpo-Cappiello advises.

    “A good prepaid debit card provider also will offer replacement and emergency cash disbursement as well as the ability to “reload” the card while you’re on the go.”

    But there are some key downsides to traveling with a prepaid debit card.

    Voluntary consumer protections. Unlike credit cards and debit cards tied to bank accounts, there are no federal consumer protections for lost or stolen prepaid debit cards. If your prepaid debit card is lost or stolen, it’s up to your issuer to reimburse you.

    In most cases, if you have registered a prepaid card with the issuer you can recover the full balance when you report a card is lost or stolen, according to Consumer Action.

    That’s why it’s so important to register your prepaid card before you travel.

    “These cards have to be personalized,” Maher says.

    Fees. Another downside to traveling with a prepaid debit card is the fees that you pay for making transactions with the card.

    Understanding the fees charged on a prepaid debit card is key to getting the most value out of a prepaid card, Maher advises.

    “You need to understand how fees are and be prudent on how you use the card,” Maher says.

    For example, how much are fees for using an out-of-network ATM?  You’ll save money on ATM fees if you stick to in-network ATMs, whenever you can, when you travel.

    “If you’re in the U.S. and you (withdraw cash) at an in-network ATM, you won’t pay a fee at all,” Maher says.

    Maher suggests studying a card’s fee structure, including load fees, before signing up for a card.

    “Do your homework,” Maher says.

    No chip for European travel.  Not all prepaid debit cards come with a smart chip, which may be needed for self-serve terminals and preferred by merchants in some European countries.

    “A lot of Europe has gone chip and PIN,” Maher explains. “You might want to look for an issuer that offers a chip-based card. So you won’t have trouble using (it) at any merchant.

    “If you’re in countries that rely heavily on chip cards, there might be certain transactions you can’t do because it’s not a chip card.”

  • Nine Tips for Avoiding Fees on Prepaid Cards

    Nine Tips for Avoiding Fees on Prepaid Cards

    Fees are inevitable with prepaid debit cards. But there’s much you can do to keep them low.

    By Lucy Lazarony

    To get the most value out of a prepaid debit card, you’ll want to avoid and minimize all the fees that you possibly can.

    “You want to understand the fee structure of the card,” says Jeanne Hogarth, Vice President of Policy, at the Center for Financial Services Innovation.  “Are there fees to do balance inquiries? Doing things online generally should be free. If you need to talk to a real live person, can you do that and is there a fee?”

    Monthly maintenance, transaction and reload fees are at the top of the list of prepaid card fees that you will want to avoid, according to Linda Sherry, Director of National Priorities for Consumer Action.

    Sherry suggests these nine tips for avoiding fees on prepaid debit cards:

    1)   Setting up direct deposit for your paycheck or other monthly income to avoid prepaid card monthly maintenance and transaction fees.

    2)   Loading a certain amount onto your card each month.

    3)   Maintaining a minimum balance on the card.

    4)   Getting cash back when making a purchase at a grocery store or other retailer, instead of paying an ATM fee.

    5)   Checking your balance by whichever method is free. (It’s very common to encounter a charge to check your balance at an ATM. Avoid card issuers that charge a fee to check your balance online or using an automated phone help line).

    6)   Loading by whichever method is free (if there is one).

    7)   Making transactions using whichever method is free (if either PIN or signature transactions are free).

    8)   Avoiding transactions that go over your balance.

    9)   Using automated “help” rather than a live customer service representative, if your issuer charges you for this, and viewing your statement online rather than getting a paper copy.

    Once you’ve avoided all the fees on a prepaid card that you can, the next step is minimizing the fees you are required to pay for using the card.

    “Scrutinize fees that are mandatory and cannot be avoided,” Sherry advises. “For example, a few cards offer fee-free transactions while others waive certain fees when you maintain a minimum balance or use direct deposit.”

    And you may be able to avoid monthly fees because of how often you use a prepaid debit card, Hogarth says.

    “Some cards even have no monthly fees but you have to use it five times a month,” Hogarth advises.

    And if you like withdrawing cash at ATMs, Sherry recommends using network ATMs because “even if there is a fee, it will be less expensive than using an out-of-network ATM.”

    A prepaid card issuer’s website may be the best source of information for a card’s fee information, according to Sherry.

    “Fee disclosures may appear on the card packaging, but the card issuer’s website will probably be your best source of complete information,” Sherry says.

    Digging through the fee information for prepaid cards could take some time. This fee list from Sherry provides definitions of 17 fees charged by prepaid card issuers.

    “Unfortunately, there’s no law that requires a standard fee chart for prepaid cards but some issuers are more upfront about their fees than others,” Sherry says. “Before you buy a card, look for a prepaid card where the issuer discloses all the fees clearly. When you’ve narrowed down your options, calculate your monthly cost for each card based on how you expect to use it.”

     

  • FDIC Insurance And Prepaid Debit Cards

    FDIC Insurance And Prepaid Debit Cards

    When you have a debit card tied to a traditional bank account and the bank goes out of business, the federal government guarantees you up to $250,000 of the money that you have in your account through mandatory FDIC insurance.

    “FDIC insurance is an important financial protection,” says Lauren Saunders, managing attorney of the National Consumer Law Center in Washington, D.C. “It ensures the safety of your money up to $250,000 if the bank fails.” So your bank could fail one day and a new bank could take over the next and the money in your bank account (up to $250,000) still would be available.

    “It’s completely seamless for the customer,” says Susan Weinstock, director of Pew’s Safe Checking in the Electronic Age Project. “The only difference for the customer is a different name on the door for the bank.”

    Unlike bank checking accounts, prepaid debit cards are not required to carry any mandatory deposit insurance, but the “vast majority” are offering voluntary FDIC insurance to customers, Weinstock says. Notable exceptions are some prepaid debit cards from American Express, including the American Express Target card, Weinstock says.

    So what happens if a company issuing a prepaid debit card without FDIC insurance goes out of business? How and when would customers get their money back? “It generally depends on state law. States have money transmitter laws and they vary a lot state to state,” Saunders says. “It’s not as robust and seamless as FDIC insurance, how much protection you have, and how that protection works varies.”

    A report from Pew Charitable Trusts titled “Imperfect Protection: Using Money Transmitter Laws to Insure Prepaid Cards” warns that “customers would be compensated with varying amounts of money, depending on the state in which they live, and some states’ residents may not be protected at all.”

    And prepaid debit card customers may have to wait months as creditors in the defunct company’s bankruptcy proceedings in order to receive any money back, according to Pew. “Without a streamlined process such as the one offered by the FDIC, a consumer would likely have to navigate the legal process in order to receive their funds. Cardholders would be unsecured creditors in a bankruptcy proceeding, and may have to wait several months for the case to be resolved before having access to the money on their cards, if they get access at all,” the Pew report states.

    That’s why it’s a good idea to check and see if your prepaid debit card provides voluntary FDIC insurance. And you may have to do some digging, according to Saunders. “Just because a card is issued by a FDIC member bank doesn’t necessarily mean the consumer has FDIC insurance,” Saunders says. “Just seeing the FDIC logo doesn’t guarantee it.”

    Saunders suggests looking for information on FDIC insurance in a cardholder agreement and on the prepaid debit card’s website. And Weinstock recommends registering a prepaid debit card because the name of the cardholder may be necessary to implement the FDIC insurance if needed. “If they don’t register the card, it may not necessarily be insured by the FDIC.”

  • The Occupy Movement Takes On Prepaid Cards

    The Occupy Movement Takes On Prepaid Cards

    The name says it all. When Occupy Wall Street became a household name a couple of years ago, the protesters were able to focus a light on the financial services industry and – at least in its view – the many harms it inflicts on the vast majority of citizens and the nation as a whole.

    While the Occupy movement was successful in raising awareness about the activities of big banks and other financial players, there has been plenty of criticism that it was lacking in concrete accomplishments. In at least one very specific way, that looks to be about to change. In July, it was announced that the Occupy Money Cooperative was being launched and that its first product would be a prepaid debit card.

    Recently, BestPrepaidDebitCards.com spoke via email with Carne Ross, a founding board member of The Occupy Cooperative, about the Occupy Card , why it chose to issue a prepaid debit card and how the group aims to change the financial services industry.

    BestPrepaidDebitCards.com : Why is Occupy’s first financial product a prepaid debit card? Is it because they have traditionally been such a bad deal for consumers? Or does it also have to do with the fact that this is a product that has a lot of potential?

    Ross: We chose a prepaid card as our first product because it’s one area where the unbanked and underbanked are exploited by current providers charging excessive and often hidden fees. We have also realized that this is a dynamic market and we believe that we can offer a competitive product in the long run, because our costs will be low. Moreover, the more users for the card, the lower the fees, as we will be able to negotiate better rates as we scale.

    BestPrepaidDebitCards.com: A breakdown of fees is important, even if it’s estimates. Just how drastically will the Occupy prepaid card differ from other prepaid cards? Besides fees, what other ways will the Occupy prepaid card be different from its rivals?

    Ross: I appreciate the questions but unfortunately I simply cannot even foreshadow the card’s fees and features at this point. We think it will be among the best deals on the market. Our aim is to minimize costs and pass these onto the consumer. We also think that the card will offer some good innovative features. Above all, if you use the card you become a member of the co-op that will offer the card, i.e. you become a co-owner of the company. You will have a stake and a say in how the co-op is run.

    BestPrepaidDebitCards.com: Do you have an estimated launch date for the Occupy Card?

    Ross: We do not. We hope soon. We are about to launch a campaign to crowd-source funding for initial operating expenses for the co-op. If successful – which we expect – we shall launch the card immediately. It’s ready to go. Until we launch the card, I’m not able to say much more, I’m afraid. We want to be super-transparent as a company, but some details we are required (legally) to withhold until the launch.

    BestPrepaidDebitCards.com: What sort of impact do you expect the card will have on banking in general?

    Ross: As we build up the number of users of the card, we shall soon be able to introduce further services that will shake up the current behemoths in the banking sector. These products will serve the same constituency as the card, wherever possible they will bolster the credit unions, provide low-cost choices, bypass the entrenched systems that rip everyone off, and brick-by- brick build alternatives for ordinary folk’s needs. I also should have been clearer in saying that because our costs are very low, we should be able to pass on any savings or benefits to our customer-members.

Prepaid Debit Card Reviews, Complaints, Etc