UPDATED: Prepaid Card Tips for Consumers

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We support reforms to the financial marketplace that protect consumers from unscrupulous banks and lenders.

By Consumers Union on Wednesday, September 15th, 2010

It’s been a year since we first released “Prepaid Cards: Second-Tier Bank Account Substitutes,” our comprehensive report that details prepaid card “gotchas” such as mountains of fees and a lack of guaranteed consumer protections.
Now we’ve updated our report to bring you the latest information about those gotchas. The report also has useful charts comparing costs among 19 popular prepaid cards.

To read our updated report, click here.

One year later, many of the fees are still outrageous and the cards are still no safer! After recently reviewing 19 prepaid cards, we compared their costs using a hypothetical consumer’s activity and found that it may cost $16.59 to use a Wal-Mart Money Card, $17.60 for an AccountNow card, or even $43.75 for a RushCard…just in the first month. Meanwhile, these cards are still not protected by the same regulations as regular debit cards tied to a consumer bank account – which means that you may be out of luck if a thief takes your prepaid card or the prepaid card issuer’s bank goes bust.

Spanish-language media giant Univision is getting into the prepaid card game too. According to this MarketWatch press release, Univision and MoneyGram are taking advantage of Univision’s strong brand loyalty to market their new Univision Prepaid Card to millions of Latino consumers.

The time is overdue for federal regulators to create a clear, uniform set of rules that cover all kinds of plastic cards, and protect consumers from the whims of different prepaid card companies!
Until then, we’ve put together some tips on prepaid cards:
• Consider a traditional bank account instead—you get a debit card, a monthly statement, and full consumer protections. Ask to opt-out of “overdraft protection” if you are concerned about overdraft bank fees.
• Find and read the fee schedule before you buy the card.
• Your cost will vary widely depending on which card you pick. Try to figure out the costs for two months.

Click here for more tips on how to protect your money on prepaid cards.

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