Four “GOTCHA” Fees When Using Prepaid Debit Cards
As with anything these days, it seems that along with the many choices and freedoms we have there also comes more responsibility. This is no different when looking for or using a prepaid debit card. There seems to be a lot of debate out there as to what is less expensive, a traditional banking account or the prepaid debit card.
No doubt, there are prepaid cards out there with outrageous fees, just as banks and credit cards. Some are obvious up-front fees like Activation Fees and Monthly Fees. We will leave the discussion on value-added extras like rewards points and savings accounts for another day. Today we will look at unexpected fees you might be faced with when signing up for a prepaid debit card. Although, this isn’t a complete list, here are some potential GOTCHAS:
Load Fees
Typically, these fees are well disclosed up front and might not be a real GOTCHA. Unless you have an existing bank account, or take advantage of direct deposit, you will more than likely have to LOAD cash onto a prepaid card, that’s where they GOTCHA! Utilizing direct deposit through an employer or benefits provider is the best way to avoid this fee.
Account Closure Fee
Some prepaid cards do not charge this fee. Others do not charge you unless you want a paper check issued. Most people do not think about this type of fee when opening an account probably because they are optimistic and only looking at how to use the card, not wondering what happens if they close it out. Fees for closing an account vary widely across the board ranging from $0-25+ with most in the $10-15 range.
Negative Balance Fee
This one really can be irritating because most of us actually acquire a prepaid card so that we won’t overspend our balance. Through some technical glitch or two purchases occurring too close to one another, some cards actually can go into a negative balance. Banks love to hit their customers with an Overdraft Fee on a checking account and some prepaid card companies have the same mentality. Many cards advertise the fact that there is no Overdraft or Negative Balance Fee. The fee can vary from $0-25+.
ATM Withdrawal/ATM Balance/Bill Pay Fees
These typically are fees that card issuers do advertise well enough up front. ATM Withdrawal Fees typically vary between cards in the $1-3 range and are justifiable since buying and servicing ATM machines is a definitive cost. Besides your card issuer, the ATM provider will more than likely charge a couple bucks as well – GOTCHA. These fee GOTCHAS can easily be avoided with careful use and a little planning. Avoid this fee entirely by getting cash over your purchase amount at a store. Most cards don’t charge (although some do) for this service. Avoid ATM Balance Fees by checking balances online or via SMS Text Alerts. Almost all prepaid cards offer these services for free. These fees are usually $1 or less, but can add up. The last GOTCHA Fee is the Bill Pay Fee. Many prepaid cards charge $1-2 for each transaction. Consider a prepaid card that offers this service free of charge (there are several). Even if you choose a prepaid card that charges for Bill Pay, you can avoid this fee by paying your balance due at the vendor’s website. Many cities, power companies,cable providers and even landlords offer this free service.
Again, this is not an all-inclusive list, but these are four major fees that can be a nuisance to prepaid card users if they are not careful. Do your research. I know, it’s a pain, but take the 15 minutes and read the terms and conditions before purchasing that prepaid card. There are other resources out there that can help you. Prepaid debit cards aren’t the only financial tool out there, but they can be a viable mechanism for the banked and un-banked customer alike. Choose wisely!
Note from Ponn: IF you don’t read terms or choose wisely as Tracy warns above, you can fall victim to ribaa, interest, which is what you should be trying to avoid when using prepaid cards. As always, we’re curious of your thoughts, please share below.
Tracy Jones is a content contributor for GetDebit.com, which provides information about prepaid products, including the WalMart MoneyCard.
photo credit: Andres Rueda
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Category: Money
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