The Consumer Financial Protection Bureau (CFPB) has site their sights on prepaid card disclosure notices to ensure that consumers understand the fees involved.  You wouldn’t think that there would be many different fees associated with using a prepaid card since it operates much like a gift card.  Sometimes it is hard to swallow the fact that you have to pay to access your money, but you are paying for the convenience of not having to carry around cash.

You can purchase a prepaid card online, at the grocery store, or other outlet.  The problem is that the disclosures published by the issuers may be incomplete and aren’t standardized so it is difficult to compare issuers.  A study by The PEW Charitable Trusts found that almost all of the 66 most popular prepaid cards did not disclose at least one of its fees.  The CFPB is trying to institute a disclosure form to make disclosures more uniform and easier to understand and compare.  In the meantime, beware of the types of fees associated with these cards so that you can see what’s missing from the disclosure and call the issuer or go onto their website for more information.

  • Initial purchase fee – Some charge an upfront fee of $3.95-$4.95.
  • Monthly fee – This is the one to watch out for since it can add up pretty quickly.  This fee may be anything from 0$-$9.95/month.  Many cards waive the monthly fee if some usage threshold is met.
  • Reloading fee – You’ll be charged a fee of around $4.95 each time you want to add money to your card.  Fees typically don’t apply for direct deposit of your paycheck or government benefits check.
  • ATM fees – You may be charged a fee of around $2.50 to use your card at an ATM.  If your card is issued by a bank, the fee may be waived if you use one of their ATM’s.
  • Foreign Transaction fee – Like most credit cards, you’ll be charged a foreign transaction fee if you use your card out of the country.
  • Transaction fee – Some cards also charge a $1 or $2 each time you use your card which is another area where you may take a big hit.
  • Inactivity fee – Ironically some cards will charge you if you use the card, but also if you don’t.  This particularly applies to cards without a monthly fee.  After anywhere from 3 months to a year of non-use, you may be charged a monthly fee in the neighborhood of $2/mo.  So, don’t throw your card in a drawer and forget about it.
  • Additional fees – there may be other fees too such as for checking your balance, having your card declined, or for getting a replacement card.

Knowing what it costs to use prepaid cards will not only help you use the card more wisely.  For instance, if you are making a small transaction, just use cash.

The other thing to consider is whether a prepaid card is right for you in the first place.  If you have poor credit or are trying to avoid the temptation of going into debt, a secured card may be a more cost effective option. Also, credit cards have consumer protections that prepaid cards do not. Whichever you choose, understanding the fees will save you money.

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