Prepaid Cards Can Be Fee Heavy Choices For Saving
By David Dierking
At first glance, the idea of a prepaid debit card seems like a good one. You load a certain amount of cash onto a card and use it like you would an ordinary debit card. It works great for younger folks too who don’t need to be tempted by the idea of free credit. They can simply make purchases up to the balance loaded on to the card and when they hit their limit they’re done. Sounds good, right?
The problem arises when the company administering the card wants to charge you an exorbitant fee just for using it. The majority of people agree that accessing your own money shouldn’t cost you money but there are some offerings out there that don’t exactly follow that logic.
Take, for example, Russell Simmons’ RushCard. His was one of the first in the line of increasingly popular celebrity-endorsed prepaid cards. The RushCard charges a $9.95 monthly fee along with an activation fee of between $3.95 and $14.95. On top of that, you get charged $2.50 per ATM withdrawal after two per month. Think that sounds expensive? You haven’t seen the Kardashian Kard yet.
The prepaid card endorsed by reality TV regulars the Kardashian sisters comes with a $99.95 fee just to get the card in the first place. Tack on to that a $7.95 monthly fee, a $1 fee to reload your card, a $1.50 fee to speak with a customer service rep and a $2 fee to set up an automatic bill payment. Thankfully, this atrocity was cancelled within a month of its debut after the Connecticut Attorney General denounced the product as “particularly troubling because of its high fees combined with its appeal to financially unsophisticated young adult Kardashian fans”. This gives a whole new meaning to “Keeping Up With The Kardashians”.
Don’t get me wrong. I don’t believe that prepaid cards are necessarily a bad product but I do think that cards that charge fees like this don’t have a place in your wallet. If you’re interested in the idea of a prepaid card, your first visit should always be to a local bank or credit union. You don’t need to anything more than set up a checking or savings account and ask about getting a debit card to go along with it to access your money. Most won’t charge you any type of fee for using it and it works just like the prepaid card. Many banks are now even offering to reimburse you for any ATM fees you get charged regardless of which ATM you use.
Some, like Simmons himself, argue that these cards serve the unbanked and underbanked population that has trouble obtaining regular bank accounts. There may be a segment that can’t or prefer not to work with a bank but there are simply too many other options out in the marketplace nowadays that would be a better alternative to a high fee card such as this.
As always, research the fees and look for options that charge no monthly maintenance fees and no fees for accessing your money at places like ATM machines. Find one of those and you’ll have more financial freedom than these cards will ever provide.
Photo credit: MoneyBlogNewz
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