An analysis of 10 prepaid debit cards found that seven failed to meet standards on disclosures that the federal government has proposed.
A CreditCards.com analysis of 10 prepaid debit cards found that seven came with hidden fees. Those cards failed to meet standards the federal government has proposed.
The U.S. Consumer Financial Protection Bureau proposed federal regulations for prepaid products in November 2014. The proposal includes what the CFPB calls “know before you owe” disclosures, which “would provide consumers with clear information about the costs and risks of prepaid products upfront,” according to the bureau.
Such information would include common costs such as the:
- Monthly fee
- Fee per purchase
- ATM withdrawal cost
- Fee to reload cash onto the account
CreditCards.com reports that the CFPB is expected to make the proposal, which is currently voluntary, a regulation as early as June.
Until then, it appears that few prepaid cards are voluntarily playing by the fee disclosure rules. In a press release, Matt Schulz, senior industry analyst at CreditCards.com, says:
“What’s concerning is that many consumers are turning to reloadable prepaid debit cards to avoid overdraft fees related to checking accounts. However, due to lack of disclosure, consumers are being charged with excessive fees for infractions they didn’t even know existed.”
CreditCards.com’s analysis found only three cards meet the voluntary disclosure requirements:
- American Express Bluebird
- American Express Serve
- Green Dot Prepaid Visa Gold
The seven cards that failed the test are:
- ACE Elite Card (ACE Cash Express)
- Opt+ (Speedy Cash)
- PayPower Prepaid Visa
- ReadyDebit Gold
- Walmart MoneyCard (Green Dot)
Understanding a prepaid card’s fee structure is key to reducing — and even eliminating — associated costs, as CreditCards.com shows by way of this example:
A user with Green Dot Visa Gold making 20 purchases a month, four ATM withdrawals and four cash reloads could pay as much as $35.75 in fees. But knowing how fees are structured, the same user could cut the monthly cost to $5.95, the amount of the monthly service fee. And even that fee can be eliminated with direct deposit of a paycheck, bringing monthly costs to $0.
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