Consumer watchdog report: Fees drop on prepaid cards

Competition in the prepaid card industry is forcing down fees on prepaid cards, according to Consumer Reports. The analysis of 16 different general purpose reloadable (GPR) prepaid cards showed that seven of the card programs did not charge activation fees at all, including cards managed by NetSpend Holdings Inc. and the Western Union Co. However, the report faulted businesses for not always offering fee disclosures upfront.

Consumer Reports found that, of the nine GPR cards that come with activation fees, Wal-Mart Stores Inc.'s Walmart Money Card, the nFinanSe Inc.-managed card and the Suze Orman-backed Approved Card offer the lowest fee ($3), while some of UniRush LLC's RushCards charge a $14.95 fee. Additionally, 13 of the card programs charge monthly maintenance fees, 14 charge cash-back fees and 12 ding consumers with balance inquiry fees.

Fees range from $2.95 to $9.95 (monthly maintenance), $2 to $2.50 (cash-back) and 45 cents to $1 (balance inquiry), Consumer Reports said. Furthermore, only five out of the 16 cards surveyed charge inactivity or dormancy fees.

Hide and seek with fee disclosures

But the consumer watchdog also discovered that fee schedules are not always easy for consumers to find. "Consumers can typically only find information about a few of the fees charged by card issuers before they purchase a card at a store," Consumer Reports said. "While some prepaid card issuers are providing direct links to fee schedules on their websites, others make finding this information more difficult."

Michelle Jun, Senior Attorney for Consumers Union, the policy and advocacy arm of Consumer Reports, believes it is the responsibility of the Consumer Financial Protection Bureau to protect consumers by enacting fee disclosure requirements on prepaid card providers.

"We need new rules that require fees to be disclosed in a simple format so consumers know the costs before they purchase a card," she said. "Prepaid cards should get the same strong protections as debit cards so consumers have the peace of mind that their money is safe if their card is lost or stolen."

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