"Not all prepaid cards are created equal and some charge fees that can really add up.” said Christina Tetreault, who authored the Consumer Reports investigation.
Yonkers, N.Y. (PRWEB) April 12, 2016
Over the past decade, millions of consumers have relied on prepaid cards to make purchases and manage their money, but some cards have come with high and unexpected fees. Finding the most economical and easiest card to use can be challenging. A new Consumer Reports investigation issued today aims to help consumers make smarter choices by rating prepaid cards on value, convenience, safety, and how well fees are disclosed.
The new report is being issued as the Consumer Financial Protection Bureau (CFPB) works to finalize regulations governing prepaid cards, which are expected in the coming months.
“Competition has helped make prepaid cards an attractive alternative to bank accounts by bringing down fees,” said Christina Tetreault, who authored the Consumer Reports investigation. “But not all prepaid cards are created equal and some charge fees that can really add up.”
General purpose reloadable prepaid cards can be used much like a traditional debit card linked to a bank account and are used by an estimated one in four U.S. households. According to the Federal Reserve Board, prepaid cards are the fastest growing noncash form of payment. Unlike traditional debit and credit cards, prepaid cards don’t enjoy the same legal protections that limit the financial liability consumers face in the event of fraud or merchant mistakes, although most card issuers provide these safeguards voluntarily.
Consumer Reports reviewed 20 different prepaid cards on four different factors: value (how much they cost to use); convenience (availability of in-network ATMs, bill pay features, and how widely the card network brand is accepted); safety (whether funds are protected with FDIC insurance); and how well fees are disclosed.
In general, the highest rated prepaid cards have fewer fees and make it easier to avoid them; carry FDIC insurance for each cardholder; offer features comparable to traditional checking accounts; and do a better job of disclosing fees.
Among the cards reviewed by Consumer Reports that were rated highly, four stand out. The American Express-Walmart Bluebird card was among the top four because it charges no monthly fee and offers some great services, such as bill pay and free access to in-network ATMs. Also highly rated were Chase Liquid Visa and Green Dot Prepaid Visa, which both charge monthly fees but are more widely accepted than Bluebird. Finally, the Halogen Reloadable Prepaid MasterCard, issued by Green Dot Bank, offers useful services such as access to free in-network ATMs and bill pay. While it charges a monthly fee, it can be waived under certain conditions.
The prepaid cards with the lowest ratings reviewed by Consumer Reports mostly scored fair or poor for value or convenience. The Univision MasterCard Prepaid card, for example, charges a monthly fee of $9.95. Both NetSpend prepaid cards rated by Consumer Reports (that are available for purchase online) charge $2.50 for an “over-the-counter cash withdrawal at a financial institution” as well as if you take money out using your card at an ATM.
Consumer Reports is not recommending the Prepaid Visa RushCards. In October 2015, Consumer Reports suspended its recommendation of these cards because of the widespread problems consumers were having when using them (RushCard was in the process of transitioning to a new card-processing vendor). The CFPB launched an investigation shortly afterwards, which is ongoing. Consumer Reports is monitoring consumer complaints registered with the CFPB and those complaints have declined after an initial spike – a step in the right direction. Consumer Reports’ suspended recommendation will remain in place until the matter has been fully resolved.
Consumers Union has long called on federal regulators to provide prepaid card users with the same protections that come with traditional bank debit cards and the CFPB has proposed new regulations that aim to do so. Among the new rules being considered by the CFPB:
- Financial institutions would be required to provide periodic statements or online account access to customers who register their cards.
- If consumers report account errors, card issuers would be required to investigate and resolve those errors in a timely manner
- Consumers would also be protected against unauthorized use of the card, which could include fraudulent withdrawals and purchases.
- “Know Before You Owe” disclosures would provide consumers with information about their prepaid card, such as applicable fees.
“Consumers deserve strong protections with this fast growing new way to pay,” said Pamela Banks senior counsel for Consumers Union, the policy and advocacy division of Consumer Reports. “The CFPB’s proposed rules would help consumers avoid costly fees and ensure that they are treated fairly.”
About Consumer Reports
Consumer Reports is the world’s largest and most trusted nonprofit, consumer organization working to improve the lives of consumers by driving marketplace change. Founded in 1936, Consumer Reports has achieved substantial gains for consumers on health reform, food and product safety, financial reform, and other issues. The organization has advanced important policies to cut hospital-acquired infections, prohibit predatory lending practices and combat dangerous toxins in food. Consumer Reports tests and rates thousands of products and services in its 50-plus labs, state-of-the-art auto test center and consumer research center. Consumers Union, a division of Consumer Reports, works for pro-consumer laws and regulations in Washington, D.C., the states, and in the marketplace. With more than eight million subscribers to its flagship magazine, website and other publications, Consumer Reports accepts no advertising, payment or other support from the companies whose products it evaluates.
— 30 —
© 2016 Consumer Reports. The material above is intended for legitimate news entities only; it may not be used for advertising or promotional purposes. Consumer Reports® is an expert, independent nonprofit organization whose mission is to work for a fair, just, and safe marketplace for all consumers and to empower consumers to protect themselves. We accept no advertising and pay for all the products we test. We are not beholden to any commercial interest. Our income is derived from the sale of Consumer Reports®, ConsumerReports.org® and our other publications and information products, services, fees, and noncommercial contributions and grants. Our Ratings and reports are intended solely for the use of our readers. Neither the Ratings nor the reports may be used in advertising or for any other commercial purpose without our permission. Consumer Reports will take all steps open to it to prevent commercial use of its materials, its name, or the name of Consumer Reports®.