While scrutiny is still required, if you’re a consumer that loves prepaid cards you’ll soon have a better way to tell how much it’s actually costing you to use them.
New rules are expected to be issued by the Consumer Financial Section Bureau sometime in the spring of 2014, including new legislation introduced by Sen. Mark Warner (D-Va) that would require improved disclosures. Ahead of those changes however a number of consumer advocates as well as banks are doing their best to get a jump on the new regulations.
For example, The Pew Charitable Trusts disclosed on Wednesday what their fee for prepaid cards would be and Chase followed suit by announcing it would voluntarily adopt the new format.
Susan Weinstock, director of Pew’s safety checking research, had this to say in their news release; “Pew’s research shows that inconsistent disclosures make it difficult to understand the fees associated with each prepaid card.” She added that “Terms should be plainly stated so that consumers can make fully informed financial decisions.” Released in 2012, their new disclosure model has already been adopted by 26 banks and credit unions gone terribly and now covers over 50% of domestic deposits.
Over the last few years prepaid cards have become much more popular even though they were originally marketed to consumers who, for whatever reason, couldn’t or didn’t have a checking account. This included “tween’s” as well as college students.
Using these types of cards a person can have their earnings directly deposited onto their card, withdraw cash at most ATM machines and also avoid charges like overdraft fees. Even more portly, they can afford going into debt because once the use of any cash that’s on the card their limit is met and they can’t go any further.
In 2012, the last year with hard data, $71.6 billion was loaded onto prepaid cards, a huge increase from the $28.6 billion that was loaded onto them in 2008.
The complaints that consumer advocates have had about prepaid cards in the past include the fact that they aren’t subject to a lot of the same protections on unauthorized transactions as credit cards are, and the fact that their fee structures can not only be confusing but expensive. For example, prepaid cards usually come with a purchase price that averages $9.95 as well as a $5.95 monthly maintenance fee and a transaction fee of $1. Out-of-network ATM fees are usually $2 while live customer service calls can cost $1.95.
It’s important to note that, in comparison to traditional checking fees, prepaid card fees still pale in comparison. A recent study done by CardHub.com found that the average checking account has between 20 and 40 different fees versus 10 fees for the average prepaid card.