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Not All Prepaid Debit Cards Are Created Equal

Not All Prepaid Debit Cards Are Created Equal

You might be surprised to learn re-loadable debit cards are the fastest growing financial products in the banking and credit card industry. A full one-third of all American consumers possess these handy little debit cards. When the recession hit some three years ago and both job losses and foreclosures began to rise, many found themselves in difficult financial situations.

Their credit scores began dropping because of the unemployment and foreclosures and as a result, many Americans are now no longer eligible for a traditional checking account. Enter the pre-paid debit card. This was the ideal solution for an ever-growing technological world. They were attractive to most everyone simply because they offered the same conveniences as their checking accounts once did.


Unfortunately, regulating this specific sector has been a challenge. Recently, two senators, Robert Menendez and Richard Durbin, both Democrats, introduced legislation that would allow better monitoring efforts and more importantly, would put into place compliance guidelines to ensure the fees don’t become too overwhelming for consumers. It would place the monitoring responsibility onto the shoulders of the Consumer Finance Protection Agency, a new arm of the government set up at the height of the financial crisis in 2008.

Rapid Growth

It’s expected prepaid or re-loadable debit cards will account for $440 billion in spending by 2017. This is four times the total of 2009’s final figures. So quickly is it growing, the government has taken advantage of these financial tools. Following Hurricane Katrina’s massive landfall in the summer of 2005, the government used prepaid cards to provide residents with emergency funds and even food assistance cards.

Those who receive food stamps now use a government pre-loaded card and in this past March, the IRS announced it would put tax refunds on prepaid cards for nearly 600,000 low income taxpayers. There’s no doubt the financial freedom these cards can provide, assuming the consumer isn’t losing a significant portion of the money he puts on the card to various fees.

The Fees

Here’s where it gets a bit tricky. The fees various card offers have can vary greatly. For example, the brief moment in time when the Kardashian prepaid debit card was in existence, those who signed up for it were hit with a $99 annual fee along with what many say was unreasonable fees for balance inquiries, ATM withdrawals and several other fees that seemed excessive to regulators. The card was pulled, but not before Revenue Resource Group sued the celebrity sisters for breaking the contract. When put next to the WalMart prepaid debit card and its $3 activation fees, it’s little wonder the Kardashian’s version of a re-loadable debit card fell short.

With the big name banks now eliminating their free checking account programs (Bank of America is now considering a $25 monthly fee for its checking account holders.), there’s suddenly a new attraction for these cards. With fewer of us actually writing checks these days, the debit cards associated with our checking accounts offer nothing more than a prepaid money card. It also means the fear of returned check fees are virtually eliminated, too, since consumers generally can’t spend more than what their balance is.

We Suggest

If you’re looking to jump on the re-loadable debit card wagon, here are a few great places to start. Keep in mind – understanding all of the fees is the only way you can really determine if one offer is better than another. As pointed out earlier, they can vary sometimes by $100. The READYdebit Visa Prepaid Card doesn’t require cardholders to maintain a minimum balance and because it reports to the three credit agencies, it’s a good choice for those looking to rebuild their credit.

Speaking of rebuilding credit, the Prepaid Visa RushCard not only reports to credit agencies, but it allows consumers to receive free text alerts on everything from checking a balance to viewing recent transactions. The 24/7 account service is a bonus, too. No monthly or annual fees finish out the highlights of this prepaid debit card.

There’s no doubt the financial sector is emerging stronger and better than before and provided regulations are put into place to keep the fees in check, the prepaid or re-loadable debit cards will be a powerful new aspect of that improved financial sector.

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