It’s back to school time, and college students are happily going to class again (or at least football games and frat parties). There are plenty of trends associated with this time of year, including back to school sales, and a big spike in Facebook usage. But there’s a new trend this year…. bashing the fees associated with the Higher One prepaid debit cards that are provided to many students.
Over the past few weeks, there have been a large number of press or blog reports complaining about Higher One cards. Outlets such as the Washington Post, Time, the Saint Petersburg Times, Reuters, the Seattle-Post Intelligencer, and others have piled on, complaining about the allegedly high fees associated with the prepaid cards issued by Higher One.
The rash of news reports seems to have started from a detailed piece written by Brent Huntsburger from the Oregonian, titled “Debit or credit? Higher One’s ‘noodly’ fees irk college students“. Mr. Huntsburger’s piece was originally published on September 4, 2010, and has been updated several times since then.
But are the complaints justified?
We took a look at the terms and conditions of the Higher One cards (the general terms are available here), and the fee structure (available here). When compared to some of the other prepaid debit cards available on the market, the Higher One cards have very low fees, and relatively standard terms and conditions.
The kicker, and focus of the article by Mr. Huntsburger (and the other media pieces that followed him) seems to focus on two items – the PIN debit transaction fee, and the “Abandoned Account Fee” which is charged after 9 months with no transactions. The Higher One cards (as is typical for prepaid debit cards) charge a $0.50 PIN debit transaction fee for transactions at merchants where “debit” is selected (and a PIN entered). The complaint is that students are encouraged to select “debit” at point of sale terminals when using these cards where if they selected “credit” (so the swipe would be processed as a “signature” transaction) there would be no fee.
This problem is not unique to the Higher One cards. It’s common to most every general purpose reloadable prepaid card on the market, and is a simple matter of education of cardholders. If you choose debit at the point of sale, you are going to get charged a fee. The fee is typically higher than if you chose “credit”. Higher One shouldn’t be singled out for these fees (although perhaps Higher One should step up with some cardholder education that lets students know their options more clearly).
The Abandoned Account Fee is a $19.00 / month fee that is charged if an account is dormant (with no transactions) for more than 9 months. The fee, clearly, is a high one. But Higher One claims that “Only 1% of account holders have ever incurred the $19.00 abandoned account fee.” and the fee can simply be avoided by using the card regularly.
Higher One may be able to address the rash of press knocks by stepping up and either making the Abandoned Account Fee more prominent on their fee disclosures, or explaining the purpose behind the fee.
In general, as compared to other prepaid card options available to college students, GetDebit.com rates the Higher One card highly. We’d love it if Higher One addressed the complaints with some proactive education. After all, it is back to school time!