Prepaid Debit Fees Too High for Some Cardholders

Sacramento, CAConsumers who use prepaid debit cards may have spent a lot more money this holiday season than they had originally anticipated. Prepaid debit card fees can add a lot to a person's expenses—some consumers say the fees are too high for what the cards offer.

However, prepaid debit cards could become the payment method of choice for many employers. According to creditcards.com, prepaid debit cards carry no revolving debt and are therefore not yet prone to hackers. The cards do not require a bank account or a good credit history. They also eliminate the need for paper checks.

Some businesses have already started paying employees with prepaid debit cards. Creditcards.com notes that some federal and state governments are now using prepaid debit cards to disburse unemployment benefits, Social Security payments and civil service paychecks.

The problem is that these prepaid cards may come with some heavy fees. According to an August 2009 report by Michelle Jun, an attorney with Consumers Union, fees associated with prepaid debit cards include initiation/activation fees, monthly fees, point of sale transaction fees, ATM fees, customer service fees, reloading fees, balance inquiry fees, dormancy fees and fees to access remaining funds when the account is closed.

"Consumers typically can find information on only a few of the fees before deciding to sign up, purchase and use prepaid cards," Jun writes. "Retail displays often contain purchase prices and initial load amounts. Consumers who research or purchase cards online will often have to engage in a careful inspection of the prepaid card websites to find complete fee information."

The report notes that customers are likely to pay at least $30 simply to activate a prepaid debit card and load money onto it. After that, customers could pay up to $10 a month to use the cards, although some prepaid debit cards waive monthly fees if the customer sets up direct deposit. Add to that a fee for reloading the card and for transactions, and that card can get pretty expensive.

Despite the fees associated with prepaid debit cards, some consumers feel they have no choice but to use the cards in order to manage their household funds and conduct their day-to-day transactions. Unfortunately, they could also be losing a lot of their hard-earned money to fees.