Assessing Prepaid Card Fees – Guest Post
Prepaid cards, prepaid debit cards, prepaid gift cards, reloadable cards – whatever term is used to describe them these cards are continuously gaining popularity in the financial world. In a time when people are finding themselves in more debt than ever and not being able to afford the fees that are associated with credit card interest rates or bank overdrafts, preloaded cards are actually one of the spending services that are attaining growth.
In fact according to a study done by the Mercator Advisory Group in 2011 on the amount of cash being loaded onto these cards, they predict by 2014 consumers will load up $167 billion onto these types of cards. This is an extremely significant amount compared to just the $12 billion that was put on reloadable cards in 2007.
While many options for saving and spending money are available, including bank accounts, online virtual accounts, credit cards, or simply using cash, prepaid cards combine some of the best aspects of all of these worlds.
They tend to be a little more fee heavy than a personal bank account but it is also impossible to overdraw the funds on one of these cards, while a bank account can be overdrawn costing the user a load of fees and inconvenience. Cards that are prepaid can be managed totally online much like a virtual bank account and have comparable fees. But a virtual bank account does not come with a card that allows users to spend in retail stores or online. And unlike a credit card, users of reloadable cards will never max out their credit limit or find themselves paying outrageous interest fees when they can’t pay off their balance.
Who Uses These Cards
Even though many people who find themselves in financial difficulties are turning to prepaid cards, they do not come without some skepticism. Those who turn to these cards either cannot get a bank account, can’t be approved for a credit card or have poor credit history. They do not have good spending or saving habits and have a hard time getting ahead financially, which is why many prepaid debit card critics warn of the fees that are often associated with these cards. They want consumers to know every transaction or card usage they will be charged for and to be aware that some cards are not always a good fit for everyone.
So if you are in the market for a reloadable card and think one might be the best option for your spending needs, read on to find out more about what fees you might be charged for, what cards have the lowest and highest fees, and how to avoid unnecessary fees that shouldn’t be required for utilizing your own money.
No matter which brand of prepaid card you choose you will more than likely be paying some sort of fee either in the form of a predetermined monthly maintenance fee or a fee per transaction or use. In the past some of these fees were hidden and users had no idea what they were being charged for. And since these fees often came straight out of their account they were running out of funds quicker than they anticipated.
Due to the large number of cards on the market now, many of these hidden fees are being disclosed up front and are also decreasing to create more competition. Even cards that claim to be “fee free” usually have some sort of one time activation fee or require a fee for certain types of reloading options.
These are just a few of the fees you can expect to find on most cards. Some may have a variety of these fees while others may only possess one or two of them:
• Activation or Purchase Fee
• Monthly Fee
• Signature Transactions
• PIN Transactions
• Balance Inquiry
• International Transactions
• Bill Pay Fees
• Use of mobile services
• Customer service calls
Cards with Low Fees
So you’re ready to take the plunge in the world of prepaid cards. It can be extremely overwhelming to find the card that is the best fit for you and trying to compare all of their fee schedules could take hours. That is why we’d like to mention just a few of the cards we have discovered in our experience that have some of the lowest fees on the market.
• YAP Card
According to the distributors of the YAP Card when you choose them you’ll “Get YAP today and keep more of your money.” With only a $5 monthly fee and a $2 fee for ATM withdrawals, this card has some of the best conveniences along with very few fees. The only other fees are optional and include $0.50 for sending money to others via text message and inquiring about your balance at an ATM.
• American Express Prepaid
The American Express Prepaid Card is almost too good to be true in its amount of required fees. There is no activation or monthly fee and all types of transactions are free as well. The only fee cardholders ever pay is $2 for an ATM withdrawal and that’s only if they make more than one per month.
Cards with Higher Fees
To some it doesn’t make sense to even choose a card that is labeled as having “high fees”. However for some people’s spending habits, the services and features these cards offer are often worth the price. Many of these cards have been criticized because of their hidden fees, but according to the Consumer Financial Protection Bureau it is recently in the process of putting federal regulations into place that will limit these hidden fees.
• Vision Silver Card
When scanning the fee schedule for this card it appears that there is a fee for almost everything you do with it. From activation to a monthly fee, an ATM fee and even $0.95 for using your PIN number when completing a transaction. This card’s fees can add up quickly especially when you get charge for a live customer service call. However this card is popular due to its features and protection against theft and fraud.
• BuyRIGHT Card
This card is one of the leaders in the prepaid market and offers very competitive fees for its users. It also offers a great rewards program which helps cardholders earn back some of the fees that they pay each month. They pride themselves on full disclosure of fees including a $9.95 one-time activation fee, $1 for every transaction, as well as $2 for ATM withdrawals. Unlike many other cards, BuyRIGHT also requires a fee for wire or bank transfers in addition to a monthly fee between $4.95 and $7.95.
In her free time, Nikki Thomas is a writer and editor for PrepaidCardsDB.com, a site dedicated to providing information about prepaid cards. You can visit the site to learn about the various cards on the market and find out which are the top rated cards. Nikki also writes informative articles about other financial topics such as managing your money and what to do if you have bad credit.