NDSU Extension Service - Ramsey County


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Pricy Prepaid Credit

Pricy Prepaid Credit


            Prepaid credit cards are the debit cards you might purchase at a drugstore/box store/ supermarket and use wherever major credit cards are accepted, even online. You do not need a bank account, since these cards are not linked to one (even though they have a Visa, MasterCard, Discover or American Express logo). There is no minimum balance required. And best of all, no credit check.

            Demand for prepaid cards is growing rapidly, as people use them to stick to a budget and avoid costly bank fees.   According to the Network Branded Prepaid Card Association, $18.3 billion was loaded on to prepaid cards in 2009. That figure is predicted to top $36 billion when 2010 figures are totaled and double again in 2011.

             For those who are college age and younger, the cards often serve as a substitute for a credit card.  New federal regulations make it harder for anyone under 21 to get a credit card. But a prepaid debit card can be more costly than you think.

            Last month, Consumers Union released a report based on its review of 19 different prepaid cards. Here are some of the fees Consumers Union found:


Activation Fee: You may have to pay between $3 and $20 to have the card turned on.


Monthly Fee: This could be as low as $2.95 or as high as $9.95. In most cases, that monthly fee is waived if you set up an automatic direct deposit.


Cash Withdrawal Fee: You can use these cards to get cash from ATMs, but in most cases you’ll pay for each withdrawal, anywhere from a dollar to $2.50.


Balance Inquiry Fee: Expect to be charged between 45-cents and $1 to find out how much money you have left on the card.


Customer Service: With most cards you can talk to a customer service agent for free. But for others you will pay between$1- $3.95 for calling customer service.


Non-use Fee: Some prepaid cards hit you with a dormancy fee if the card is not used for a certain period of time.


            Some other downsides - Federal regulations spell out specific safeguards if a traditional debit card is lost or stolen and used fraudulently. If you report the problem to the bank within two business days, your liability is limited to $50. Consumer advocates point out there is no such federal protection for prepaid debit cards, although the credit card companies all promise “zero liability” protection.

            As in other areas, a well-informed consumer is a wise consumer. Before you choose a card, shop around. Go online to the card’s site, compare the price to buy the card and the fees to use it. Some cards are significantly better than others.



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