Prepaid Debit Card Reviews, Complaints, Etc

Tag: unbanked

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.

November 22, 2013
Prepaid Cards Are Not Just For Gifts Anymore

A new report issued by Mercator Advisory Group finds that more consumers want prepaid cards for themselves, not just friends and family.

by Chris Warren

For years now, prepaid cards have been a handy fallback for the unimaginative or too busy gift giver. Don’t know what to get grandpa for his birthday? No problem. Just grab a gift card from Target or Wal-Mart and let him decide.

While there’s little doubt that gift cards will remain a popular form of prepaid cards, a recent report from Mercator Advisory Group suggests that consumer tastes are changing. For its report, “Prepaid 2013: U.S. Consumers Buying More Prepaid Cards for Own Use,” the Boston-based payment and banking industry consultancy surveyed 3,000 adult American consumers in order to gain deeper insights into changing prepaid card usage.

On the most basic level, Mercator’s results confirmed what other research has been repeatedly saying about prepaid cards: More people are getting them. In fact, Mercator found that 53 percent of adults surveyed had purchased prepaid cards during the preceding year, an increase of six percent from 2012.

While it remains true that the majority of prepaid cards purchased by survey respondents were for gifts, Mercator says that the percentage bought for a consumer’s own use is rising. This is particularly true among consumers who buy so-called “virtual cards,” which are prepaid cards delivered via text or through a mobile app. Among those surveyed by Mercator, half bought virtual cards for their own use while the other half purchased them as gifts for others.

According to Karen Augustine, manager of the CustomerMonitor Survey Series at Mercator and the report’s author, financial institutions are eager to understand just how much prepaid cards will be accepted among consumers. “As new banking regulations force many banks to raise fees on checking accounts and debit card rules continue to be challenged, many in the banking and payments industry are looking to prepaid cards to gauge their use as a preferred payment tool,” she says.

If the results of the Mercator study are any guide, expect an even bigger embrace of prepaid cards in the future. “Prepaid buyers are more likely to be younger, mobile-enabled, and buy cards for their own use. Prepaid cards are becoming more of a primary payment method and not relegated only for gifts,” she says.

November 12, 2013
Does Your Grandmother Need a Bluebird?

A well-chosen prepaid debit or checking alternative card offers freedom, flexibility and peace of mind to the elderly and their children.

by Bev O’Shea

Prepaid debit cards, once the province of the non-creditworthy and desperate, are finally becoming downright respectable (some of them anyway – you still have to be careful). Some cards now specialize; for example, allowance cards and cards for recovering addicts. So far, I haven’t seen suggestions that these should be used for elderly or disabled adults, but the idea seems workable.

Most are still aimed at what the industry calls “the unbanked.” My guess is that’s not your grandparents. But pair cognitive decline and access to a checking account or credit card, and, well, you can see the potential for disaster. You may not want to take away credit cards, but you don’t want to leave people you love vulnerable, either. The right prepaid debit card can offer a compromise.

Shop around and you can find a card that offers sub-accounts and a low (or no) monthly fee. You can both monitor and fund sub-accounts. Check and compare fees because differences can be huge.

Purchases for more than the amount in the account will not be approved, but the cardholder (say, your grandmother) could shop or buy a meal out. The account owner can opt for real-time text alerts as well. That way, if the card is stolen, unauthorized purchases can be detected right away. You can remove the indignity of constant, obvious monitoring; if monitoring is needed, it can be done discreetly.

Somehow these bring to mind my grandmother, who wisely put her own father on an allowance the same day he asked for money to buy a newspaper at the corner. He needed pocket change, his own. A prepaid debit card can work much the same way.

And, unlike a debit card (which can theoretically empty the owner’s checking account if stolen), a prepaid card can be loaded with only the amount you anticipate spending. This can also work as a budgeting tool to impose limits on spending. If self-control or good judgment falls short, the card can keep a budget on track. If the person with the subaccount needs to maintain good credit, there are other ways to do that. It’s worth noting that prepaid cards do not build credit.

One candidate for protecting loved ones would be the checking alternative, American Express Bluebird card, which is not technically a prepaid debit card but shares many of the same features. I’m using it now to help a teen learn about budgeting. Once I began using it, I realized that this has the potential to both protect older adults from spending recklessly while also freeing them to use plastic.

You can buy a kit at Wal-Mart for $5 if you want to load it and use it right away. If you apply online, signup is free. The card can be used anywhere American Express is accepted.

And no, they didn’t pay me. I just happen to love some people who might need a little protection now and then.

October 16, 2013
Beware The Prepaid Debit Card Trojan Horse

The use of prepaid debit cards for tax refunds hurts the poorest citizens

by Curtis Arnold

It’s a cliché, but it bears remembering: if something sounds too good to be true, it probably is. And to be sure, the prepaid debit card industry has a long and ongoing legacy of hyperbole, with card issuers saying plenty about the ease and convenience of their plastic products and precious little about often-predatory fees.

Obviously, it’s no surprise whatsoever to see companies with wares to hawk ignore or downplay the perils of prepaid debit cards and instead tout their benefits. But increasingly it is presumably impartial and consumer-oriented governments that are extolling the wisdom of using prepaid debit cards to deliver tax refunds to the millions of Americans – 17 million adults, or 8 percent of all U.S. households, by the Federal Deposit Insurance Corporation’s (FDIC) latest tally – who lack bank accounts and can’t take advantage of direct deposit.

The arguments government officials in states like Oklahoma, Connecticut and Virginia make in favor of utilizing prepaid debit cards to deliver tax refunds to so-called unbanked citizens sound persuasive. For the citizens themselves, receiving a refund via a prepaid debit card instead of a paper check means they’ll get their money weeks faster than if they had to wait for snail mail. Speed is no small matter for many low-income Americans who use their refunds to pay off high-interest payday loans that they may be forced to take while waiting for a check from the U.S. Treasury.

The governments themselves also insist that prepaid debit cards are a boon to all taxpayers. The crux of the argument is that cash-strapped governments can garner big savings by delivering refunds electronically with prepaid cards instead of printing and mailing physical checks. At least one study reported that it cost nearly $1 more to mail a check than to deliver an electronic payment.

In this era of belt-tightening austerity, that sort of taxpayer-saving government efficiency is to be cheered, right? Not exactly. Persuasive new research by John Friedman, an assistant professor of public policy at the Harvard Kennedy School, dismantles the deceptively alluring argument that tax refunds delivered on prepaid debit cards are good for everyone. In an article at Bloomberg Law, Friedman concedes that state governments can trim their own costs by switching from paper checks to prepaid debit cards. But the problem is that many of the hefty fees associated with prepaid debit cards – such as an account set-up charge and fees for taking money out of an ATM – are pushed off on to the taxpayers receiving the refunds. In his research, Friedman cites data from the now discontinued federal tax refund program in which taxpayers received money on a MyAccountCard. Recipients of refunds on that particular prepaid debit card paid an average of $19 during the first six months of use, an amount far and above the $1 governments save.

What is particularly troubling about this rush towards offering – and sometimes actually mandating – those who don’t have bank accounts receive their refunds on prepaid debit cards is who is being impacted. Unbanked Americans are typically poor. Forcing the poorest among us to shoulder what amounts to a minimal government cost savings sounds too bad to be true. Unfortunately, it increasingly is.

September 20, 2013
Debit Cards, Credit Cards and Bank Accounts Could Be Required If You Want to Receive Health Coverage

According to information provided by the Federal Deposit Insurance Corporation (FDIC), more than 17 million adults in the United States are unbanked. Additionally, 43 million are considered underbanked, still relying on payday loans check cashing services to handle regular banking needs. This could be a huge obstacle for those shopping for health insurance under the Affordable Care Act.

Millions of Americans are expected to be eligible for tax subsidies under the health care overhaul that they can use to purchase coverage on new marketplaces. With few regulations about what types of payment health insurers must accept, the unbanked could run into trouble paying the monthly premiums.

According to the Washington Post, the unbanked rate tends to be higher among minority groups. The Department of Health and Human Services addressed this issue in a letter to health insurers on April 5, saying that insurance carriers must be “able to accept payment in ways that are non-discriminatory.”

One possible deterrent to accepting credit cards could be the administrative fee that comes along with a credit card transaction, which could slightly increase premium costs. “The reason this is such an issue is that insurers are increasingly saying that they will not accept debit or credit cards as an acceptable form of payment,” study author Brian Haile said. “If insurers refuse to accept premium payments made by debit cards, you’re going to exclude many uninsured Americans.”

For more on this story, visit: http://www.washingtonpost.com/blogs/wonkblog/wp/2013/05/22/millions-of-americans-dont-have-bank-accounts-that-could-be-a-problem-for-obamacare/

For more from this author visit: Tameka Riley’s Author Page

May 27, 2013