Prepaid Debit Card Fees

A prepaid debit card differs from a credit card: with a prepaid debit card, the consumer deposits, or loads, money on the card when the card is purchased. Prepaid debit cards can be reloadable, meaning that if their balance is depleted, the cardholder has the option to add more money to the value of the card and keep the same prepaid debit card number.

However, prepaid debit cards can carry high fees and consumers say they were not adequately warned about those fees. For example, consumers were often charged an activation fee that was taken off the value of the card as soon as the card was activated, without the consumer's knowledge of the fee.

Many prepaid debit card users are low-income earners or new immigrants who are unable to open a bank account or be approved for a credit card. About 80 million Americans have little or no interaction with a bank and the prepaid debit card industry is targeting these consumers.

The industry says they operate on small margins and make it up in volume, but in so doing, they "nickel and dime" the consumer. Unfortunately for most frustrated customers, the prepaid card has proven to be a more expensive way to bank.

Green Dot Visa

Green Dot is one of the biggest providers of prepaid debit cards. It claims that consumers "can count on us to be there for you" but many of its customers complain of poor customer service and Green Dot fees they didn’t realize they would be incurring.5

Although financial industry officials say their prepaid card user fees are declining, they cost substantially more than bank charges. Green Dot fees, including point-of-sale transactions, can cost upwards of $30 per month. Some customers have complained that they have deposited funds into their account but can't access their money. Meanwhile, monthly fees continue to be withdrawn from their account.

Green Dot Fees

As listed on the Green Dot website fee schedule:

• Initial Purchase: Varies by retailer, from $4.95 to $6.95
• Monthly Charge: Waived in any monthly billing cycle when you load at least $1,000 to your card or make 30 purchase transactions, otherwise, $5.95.
• ATM Withdrawal: free at participating ATM's, otherwise $2.50 per withdrawal.
• Teller Cash Advance: $2.50
• ATM Declined Withdrawal: $0.50
• ATM Balance Inquiry: $0.50
• Lost/Stolen Card Replacement: $6.00

Other Prepaid Debit Card Companies

Green Dot is not the only company alleged to have not adequately warned consumers about the fees associated with the prepaid debit cards. The New York Times (October 6, 2009) conducted an investigation into high fees that consumers may or may not have been aware of that were charged by prepaid debit companies. The following prepaid debit cards were mentioned in that article:

• Green Dot Visa Prepaid Card
• MiCash Prepaid MasterCard
• Millennium Advantage Prepaid MasterCard
• Silver Prepaid MasterCard
• Only 1 Visa prepaid card
• Wal-Mart Money Card
• Vision Premier Prepaid Visa Card

There may be consumers who used cards by other companies not mentioned in this list who feel they were not adequately warned about the fees associated with their cards. Consumers who used prepaid debit cards from any company may be able to file a complaint if they were not adequately warned about fees they would be charged for using those debit cards.

As part of the credit card legislation, which was enacted in spring, 2008, Congress has asked federal regulators to investigate pre-paid cards and report back by next February. So far this relatively new industry has avoided regulatory oversight that could give added protection to customers. Until that time, consumers may want to seek legal help.