Prepaid Debit Cards More Popular, Despite Fees


The New York Times
By: Ann Carrns
April 15, 2013

An analysis of prepaid debit cards finds that even as more consumers use the cards as an alternative to checking accounts, fees on the cards still vary widely.

"More consumers are looking at prepaid debit cards as a substitute for traditional checking accounts," said Greg McBride, senior financial analyst at, which prepared the review. The amount loaded on such cards last year totaled nearly $77 billion, and that figure is expected to more than double by 2015, according to industry projections.

For the analysis, checked fees on 24 widely available prepaid cards from Feb. 12 to 19.

The cards offer an alternative to lower-income consumers who may not qualify for a traditional checking account, or those who are worried about being charged overdraft fees. Consumers load funds onto the card and then spend down the balance by making purchases and paying bills.

Various reports over the last year have put a spotlight on fees charged by prepaid debit cards. Some cards make it difficult for consumers to find information about fees, according to Consumer Reports, so it can be difficult to comparison shop.

The fees vary depending on the issuer and the way in which the consumer uses the card. Mr. McBride noted that several national and regional banks, including JPMorgan Chase, have introduced prepaid cards with somewhat simplified fee schedules in an effort to court "under-banked" consumers. People with those cards benefit from using the bank's own network of A.T.M.'s., which may make it easier to avoid some fees. (Just as with regular checking accounts, though, prepaid debit card issuers charge a fee for using a competitor's A.T.M. All of the prepaid cards in Bankrate's survey assessed out-of-network fees ranging from $1.50 to $2.75.)

More than half of the cards in Bankrate's survey charge a monthly service fee, which ranges from $3 to $9.95. But most cards that charge a service fee offer ways to waive or lower it, based on the amount of money loaded on the card.

Most cards don't charge activation fees if they are bought online, and about half can be bought in person without such a fee. The activation fees, when charged, are usually a one-time fee ranging from $2.99 to $14.95.

None of the cards reviewed charge "reload" fees, for putting more money on the cards.

One of the more frustrating fees on the cards is a charge for calling customer service. Bankrate found that a minority of cards in its review carry such a charge, with $2 the most common fee. The majority of cards reviewed provide at least one free call per month, and two-thirds never charge for telephone customer service.

Fifteen of the cards do not charge for declined transactions, but five, for instance, charge from 25 cents to $1.95. Four charge only for transactions declined at an A.T.M.

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