Over the past decade, prepaid debit cards have gained momentum in the financial world, mostly with people considered unbanked or underbanked. In recent studies, it has been estimated that some 40 to 60 million people fall outside the traditional banking system either by severing relationships, being unable to qualify as a customer or just plain mistrust. Whatever the reason, the prepaid card market has capitalized on these circumstances and continues to provide more value and service to the public that patronizes them. For some, the relationship has been mutually beneficial and for others, somewhat unpleasant. Behind this unpleasantness, for the most part, has to do with prepaid card fees.
Some prepaid cards have a very simple fee structure. Hey, we’re all for that, simple is usually better. Although sometimes customers want more value and features associated with their financial tools. Some features that immediately come to mind are rewards such as airline miles or merchant points. Other desirable features might include being able to get cash from a retail bank teller, get a secondary card for your teenager, pay bills online or even having an attached interest-bearing savings account. The list goes on. In order for prepaid companies to continue to offer these types of features, it becomes necessary to charge for them.
Paying extra for features can be quite advantageous for many customers. Now, there are also fees out there that can seem punitive in nature, so always make sure to read a prepaid card’s (or any financial instrument for that matter) terms and conditions or cardholder agreement to make yourself aware of any undesirable fees. Here are some fees that you might not be aware of that come with many prepaid debit cards:
- Paper Statement Fee – This fee is charged should you desire to have a paper account statement mailed to your home. Monthly fees for this can run anywhere from $1.00 to $10.00 per statement. Use the prepaid card’s online account system to balance and maintain your account and avoid this pesky fee.
- International ATM Fee – Whether withdrawing funds from an international ATM or checking your balance, always be aware of these fees as most cards charge them and they are typically more expensive than domestic ATM fees. Some cards do not offer international services and many that do have very high fees, so watch out for this charge. When at all possible, use a network-branded card like Visa or MasterCard for purchases abroad.
- Currency Conversion Fee – Many prepaid cards (and credit cards as well) also have this relatively obscure fee that is usually a percentage of the currency conversion transaction amount, usually 1-3%. This fee could add up if you are transacting large amounts. Converting from one currency to another almost always involves a fee whether you are using plastic or cash. This fee might also be referred to as a foreign transaction fee.
- Stop Payment Fee – In some circumstances, you might mistakenly pay a bill using a prepaid card’s online bill pay mechanism, only to find that it was previously paid by you your spouse. In any event, you now want to cancel the transaction. Be aware that some prepaid cards might charge you a stop payment fee for this transaction anywhere from $1.00 to over $25.00. This fee might also be called something like Bill Pay Check Cancellation fee.
- Lost or Stolen Card Replacement Fee – There are actually some prepaid financial institutions that will replace a lost card at no charge, but many do not. Fees are all over the board on this one with some reaching $15.00 or more per replaced card.
- Account Closure Fee – More than a few cards do have this annoying fee that could cost you over $15.00. Some companies only charge if you require a paper check to be mailed for the balance. Always check for this potentially “hidden” fee before signing up.
- Negative Balance Fee – This one can be especially annoying since most prepaid cards tout the “no overdraft fee” concept. Technically, two or more transactions COULD be charged on a single prepaid card if the merchant or delivery system doesn’t process them in an expedient manner. Some cards only require that you always be responsible for the balance owed. Other cards may charge a Negative Balance Fee, which can run from a couple of dollars to over $25.00 per incident.
Of course, there are other obscure fees that you will find in the prepaid market, but ones we’ve included above are more common than you might think. With that in mind, continue to scan your prepaid resources, do you homework and get that card that is right for you. Happy Hunting!