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Prepaid options examined for high fees, putting unbanked at disadvantage
October 6, 2009
Products targeted at the unbanked continue to carry high fees, according to a joint reporting project from The New York times and PBS's "Frontline." The two news organizations take a hard look at the Green Dot Visa Prepaid Card, which touts its "No Credit Check. Safer Than Cash.
No Bank Account Needed" advantage for unbanked consumers.
But the card carries several fees, not only for purchases but also for ATM usage. And Green Dot is not the only one. The MiCash Prepaid MasterCard charges its cardholders a $9.95 activation fee, as well as recurring fees, such as $1.75 for each ATM withdrawal, $1 for each ATM balance inquiry, 50 cents for each purchase, $4 for monthly maintenance, $2 for inactivity after 60 days and $1 for a call to customer service.
The Millennium Advantage Prepaid MasterCard goes further, according to The New York Times and Frontline, with an application fee of up to $99. The Silver Prepaid MasterCard, on the other hand, notes that it does not charge for overdrafts but offers an option of charging a $25 shortage fee if customers exceed their balances.
Jean Ann Fox, director of financial services at the Consumer Federation of America, says the fees add up quickly for consumers who are already behind the proverbial financial eight-ball:
It's a very expensive way to bank.
Some 80 million U.S. consumers are categorized as being unbanked or underbanked. The group includes college students and minorities. Often, this group turns to prepaid cards because they cannot open bank accounts.
Despite more governmental oversight of the credit industry, few regulations exist in the prepaid space. But Congress has asked regulators to review prepaid cards to see if they warrant the same protections extended to debit and credit cards.
Trends / StatisticsPrepaid / Stored Value / Gift CardUnderbanked / UnbankedDebit / CreditNorth America
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