Prepaid Cards Are On The Rise – Is It Convenience?
Tuesday, October 6, 2009, 12:12 PM | Leave Comment
Go to any drug or convenience store or stores like Wal-Mart, you would find an abundance of prepaid cards. They are gift cards for retailers, phone cards and such that you can buy for a fixed amount of $5, $10, $50 or more. The convenience is that the vendors don’t check your credit and their mantra is “Safer Than Cash. No Bank Account Needed.” Of course, when you are able to pay in cash, there is no need for the vendors to keep a tab on you. The usage for these prepaid cards, then, has to be on the rise, basically for their convenience.
For many people who do not have bank accounts, or cannot get a credit card, the appeal is irresistible, making the re-loadable cards among the consumer banking industry’s fastest-growing products. But their convenience comes with a catch: fees, often hidden in the fine print.
In general, you pay an activation fee of as much as close to $10. On top of that, you pay numerous recurring fees, including for each
- A.T.M. withdrawal,
- A.T.M. balance inquiry,
- purchase,
- monthly maintenance,
- inactivity after 60 days and
- a call to customer service.
A cottage industry only 10 years ago, re-loadable prepaid cards have tapped into the vast pool of about 80 million consumers who have little or no access to bank accounts, including folks from every walk of life. More typically, it comprises low-income people and immigrants who have fewer financial options than other Americans.
In a Nutshell
The lack of regulation means that prepaid card users can continue to be blindsided by hidden fees, and have few legal protections to recover their money if a card is lost or a charge disputed.
When you buy a prepaid card for any reason, make sure you read the fine prints and be aware of the hidden fees that you would be charged when you use the card.
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