Prepaid Cards: What you need to know
Prepaid Cards’ Hidden Fees Can Erode Benefits
Prepaid credit cards can provide convenience and safety, but too often come with lots of charges—a fee to sign up, to deposit money, to check a balance, to cancel. The list can add up quickly. Because the disclosure of these fees varies from card to card—many are hidden altogether—consumers have a tough time comparison shopping.
The rules governing prepaid cards need to change so that fees and terms are reasonable and presented clearly. Until then, consumers should beware.
Before signing up for a card, track how you would use it: mostly for purchases or cash advances, or as an alternative to a checking account or credit card? Then shop around, focusing on the costs associated with those types of transactions. Be especially careful to avoid a costly feature some lenders offer that allows a prepaid card holder to overdraft, but for a fee carrying a triple-digit interest rate.
Consumers should also look into debit cards, though these too have potential drawbacks. And they should look into credit cards, where new rules have made pricing clearer without raising rates.
Here are some recent news stories with tips on what to look out for, as well as a link to a new report by the National Consumer Law Center (NCLC) on prepaid cards that rip off those receiving unemployment compensation.
- Tips from Creditcards.com: what to you need to know about prepaid cards
- 9 tips on using prepaid cards
- Florida AG investigating 5 prepaid card companies for possible unfair and deceptive practices, including hidden fees
- Drawing Benefits Via a Debit Card? There's a Fee for That
- 8 Ways to Avoid Getting Burned With Prepaid Debit Cards
- Read the NCLC Report: "States Should Stop Nickle and Diming the Unemployed.”