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Continued: Concerns accompany spread of prepaid cards

  • Article by: JENNIFER BJORHUS , Star Tribune
  • Last update: March 11, 2013 - 4:26 PM

“We’re still learning,” Morrison said.

Increased competition

Already, the big bank newcomers are changing the prepaid game — and some say for the better.

Big banks are helping drive down prepaid costs because they have plenty of other ways to make money and can offer the cards more cheaply, industry pros and consultants say., which ranks prepaid cards by an annual total of the most common fees, has the U.S. Bank Convenient Cash Card at No. 1. with fees of $39. In last place is the ReadyDebit Platinum card, which smacks holders with $420 in fees.

Even just a year ag, consumers weren’t doing much cost comparison with prepaid cards, and prepaid issuers knew that, said Anisha Sekar, NerdWallet’s vice president of credit and debit products. The new card issuers are marketing themselves as affordable.

“That’s really shifted the dialogue,” Sekar said.

One feature that consumers should have front and center, she said, is whether a prepaid card offers free access to an ATM network. Without it, card holders will get hit by an ATM surcharge every time they use one.

Whether or not card issuers adequately disclose such fees is an issue the Consumer Financial Protection Bureau (CFPB) is examining. It’s also looking at what protections are offered for lost or stolen cards, whether money loaded onto cards is insured by the Federal Deposit Insurance Corp. and overdraft features, among other things.

NerdWallet ranks 59 cards, but there are more than that and the proliferation of terms and features can be bewildering. The arrival of the big banks has only added to the confusion, said Papadimitriou at

He said the CFPB should focus on limiting the number of fees that card issuers can charge, and standardizing the names of the fees so consumers can comparison shop.

Some consumer advocates also want the CFPB to ban overdraft fees and any other potential credit features, saying prepaid cards should remain prepaid in order to be a safe alternative to bank accounts.

Tracy Fischman, executive director of AccountAbility Minnesota, said her organization worked hard to find a safe, affordable card for its clients. The group provides free tax assistance to low-income people, as well as savings accounts, and it started offering prepaid cards for tax refunds two years ago because clients were asking for them.

Her group now works with U.S. Bank to offer AccelaPay, a prepaid card used by many employers for payroll that Fischman’s clients can use for their tax refund, and continue using afterward. Last year 490 customers deposited their refunds on the cards. They can also put their paychecks onto the card for free.

One wrinkle: Cardholders report being charged $2 to $5 to load more money onto the cards. But overall, the response has been good, she said.

Melisa Pertile, of Minneapolis, said she just got one of the cards through AccountAbility Minnesota, which did her taxes for free. She said she expects it to make her life easier.

Until last year when she got a prepaid card through H&R Block, she had been operating on a cash-only basis. Check-cashing places charge $5 to cash paychecks, she said, and she drove around to pay bills in person.

“Who knows where that would be,” she said. “When you’re a single parent it’s kind of hard. Every little bit counts.”

Fischman, at AccountAbility, said she was originally skeptical of the cards because of the lack of regulation, but she now sees them as a tool to help people be financially secure and build assets.

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