Credit and Debit Card Ratings

Oakland Issues Hybrid ID – Prepaid Debit Cards

by Shane Tripcony

From a municipal public policy standpoint, Oakland, California’s decision earlier this year to issue identification cards that also act as prepaid debit cards was hailed by some as a double play. For one thing, the decision by Oakland officials to make ID cards bearing a person’s photo, name, address and signature available was a way to provide citizens, both legal and illegal, a route to utilize local government resources, like museums and libraries. In providing this kind of ID card, which can’t be used in lieu of a driver’s license or for air travel, Oakland was following the lead of other cities, such as nearby San Francisco and New Haven, Connecticut.

But according to a recent article on Governing Magazine’s blog, Oakland is the first city in the nation to provide an option for the users of the municipal ID card to also use them as a prepaid debit card. According to the article by J.B. Wogan, the reason Oakland chose to do this is because of a desire to encourage more low-income residents – typically the segment of the population that does not already have an ID – to have access to traditional banking services. Often, citizens who don’t have bank accounts rely on expensive check-cashing and payday lenders for their financial service needs.

The Oakland initiative adding a prepaid debit card function to municipal IDs is attractive enough that about 2,000 citizens have already gotten them and cities like Los Angeles and New Haven are considering rolling out their own programs. But not everyone is a fan of the type of prepaid card Oakland makes available to its citizens. In particular, the city is being criticized for what some see as the excessive fees associated with the card. To get the ID, citizens have to pay a flat $15 fee. Once the prepaid debit card function is enabled, users pay a wide range of other fees, including a monthly service fee of $2.99, a point of sale charge of $0.75, $1.50 for in-network ATM cash withdrawals and $2.99 for customer service assistance.

While these fees are not uncommon in the realm of prepaid debit cards, critics argue that Oakland can and should do better. In an open letter to the National League of Cities, Michelle Jun, a senior attorney with Consumers Union, the policy and advocacy arm of Consumer Reports, expressed concern that city-issued prepaid cards weren’t offering citizens the best possible deal. “We believe that given the position of a municipality as a trusted entity, cities have the added responsibility of providing the most consumer friendly financial products and services,” writes Jun. “We believe the government and other public entities that choose to link a prepaid card option to any card or service provided by a municipality should provide its citizens with an opportunity to access a product or service that is fairly priced and provides the best value to the user.”

As Wogan points out in his blog, Oakland’s fees are lower-than-average, according to a study done last year by the Pew Charitable Trusts. Still, according to Jun and others, cities issuing prepaid debit cards should ensure that they have as low fees as possible and provide as much protection against loss or fraud as is feasible.

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  • Oakland Issues Hybrid ID – Prepaid Debit Cards

    Oakland Issues Hybrid ID – Prepaid Debit Cards

    by Shane Tripcony

    From a municipal public policy standpoint, Oakland, California’s decision earlier this year to issue identification cards that also act as prepaid debit cards was hailed by some as a double play. For one thing, the decision by Oakland officials to make ID cards bearing a person’s photo, name, address and signature available was a way to provide citizens, both legal and illegal, a route to utilize local government resources, like museums and libraries. In providing this kind of ID card, which can’t be used in lieu of a driver’s license or for air travel, Oakland was following the lead of other cities, such as nearby San Francisco and New Haven, Connecticut.

    But according to a recent article on Governing Magazine’s blog, Oakland is the first city in the nation to provide an option for the users of the municipal ID card to also use them as a prepaid debit card. According to the article by J.B. Wogan, the reason Oakland chose to do this is because of a desire to encourage more low-income residents – typically the segment of the population that does not already have an ID – to have access to traditional banking services. Often, citizens who don’t have bank accounts rely on expensive check-cashing and payday lenders for their financial service needs.

    The Oakland initiative adding a prepaid debit card function to municipal IDs is attractive enough that about 2,000 citizens have already gotten them and cities like Los Angeles and New Haven are considering rolling out their own programs. But not everyone is a fan of the type of prepaid card Oakland makes available to its citizens. In particular, the city is being criticized for what some see as the excessive fees associated with the card. To get the ID, citizens have to pay a flat $15 fee. Once the prepaid debit card function is enabled, users pay a wide range of other fees, including a monthly service fee of $2.99, a point of sale charge of $0.75, $1.50 for in-network ATM cash withdrawals and $2.99 for customer service assistance.

    While these fees are not uncommon in the realm of prepaid debit cards, critics argue that Oakland can and should do better. In an open letter to the National League of Cities, Michelle Jun, a senior attorney with Consumers Union, the policy and advocacy arm of Consumer Reports, expressed concern that city-issued prepaid cards weren’t offering citizens the best possible deal. “We believe that given the position of a municipality as a trusted entity, cities have the added responsibility of providing the most consumer friendly financial products and services,” writes Jun. “We believe the government and other public entities that choose to link a prepaid card option to any card or service provided by a municipality should provide its citizens with an opportunity to access a product or service that is fairly priced and provides the best value to the user.”

    As Wogan points out in his blog, Oakland’s fees are lower-than-average, according to a study done last year by the Pew Charitable Trusts. Still, according to Jun and others, cities issuing prepaid debit cards should ensure that they have as low fees as possible and provide as much protection against loss or fraud as is feasible.

  • Occupy Prepaid Debit Card No Slam Dunk

    Occupy Prepaid Debit Card No Slam Dunk

    When the Occupy Wall Street movement announced its intention to unveil a prepaid debit card this past July, the news stirred plenty of attention. Unsurprisingly, the notion that a group of protesters who directed the bulk of their anger at bankers would enter the financial services industry was too delicious a story for many news outlets to pass up.

    Adding to the allure of the creation of The Occupy Cooperative, which will release the Occupy Card and eventually hopes to offer other banking services to its product line, was the possibility that it could be the start of a shakeup of Wall Street that protests alone could not accomplish. “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,” Carne Ross, a founding board member of the Occupy Cooperative, told BestPrepaidDebitCards.com in a recent interview. “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.”

    Good intentions and plenty of publicity aside, the Occupy Cooperative faces a tough road ahead. That’s the message of a recent article in Time Magazine entitled “5 Hurdles an “Occupy”-Branded Banking Product Must Clear.” In the story, reporter Martha White identifies a number of challenges Ross and his colleagues will face as they begin their crusade to upend the financial services industry.

    Among the hurdles the Occupy Cooperative must surmount are raising a sufficient amount of start-up capital. In her story, White cites the efforts of Occupy activists in San Francisco, who have tried and failed thus far to cobble together enough cash to launch what’s known as the “People’s Reserve Credit Union.” Also problematic, at least if Occupy intends to act like a regular bank and take deposits and offer loans, are the many, many regulations involved. While the Time article correctly points out that prepaid cards are largely unregulated (at least for now), entering into traditional banking services would require Occupy to buy a bank or credit union, since starting up a new one would mean obtaining a federal or state charter.

    Other challenges Occupy faces also include the need to access the payment system – which costs money – so that cardholders can actually use their plastic and simply being viable financially if, as Ross promises, there are few fees associated with the card. Finally, White uses the example of PerkStreet Financial as a cautionary tale. When PerkStreet launched five years ago, she writes, it promised to upend the banking system by offering consumers such incentives as 2% cash back on debit card purchases. But PerkStreet’s ultra consumer-friendly approach didn’t make it; it will shut down in September. “We tried to change banking, the most broken industry in the country, in the midst of a financial crisis. It was incredibly hard and we were ultimately unsuccessful,” the article quotes PerkStreet CEO Dan O’Malley, from a blog post O’Malley wrote.

    Only time will tell whether Occupy can figure out a way to succeed. Obviously, though, the group that hit the streets to protest inequality and the abuses of the financial system knows better than anybody how hard change can be.

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