Oakland Cuts Fees to City's ID/Prepaid Debit Card

by Mercator Advisory Group 0

Oakland recently introduced a new combined identification/debit card, which has proved to be popular for its identification function. Consumer watchdog groups, however, have criticized the fees associated with the card.

The fees are one way for the Oakland to pay for the program’s cost, but are far from competitive when compared with other prepaid debit cards on the market. Some 3,300 people applied for the card in the first two months is was available, which city officials said get them to 50% penetration for the year based on their estimates. But the fees associated with the card should damper holders’ interest in activating that feature.

Oakland recently eliminated fees for enrollment and loading the card with government benefits, which should increase activations. But it’s more likely consumers will extract the value in cash via an ATM for $1.50, which would limit the city’s fee income.

If cardholders regularly use the card for purchases, they will pay a maximum of $12.50 per month at 75 cents per transaction, or about 16 transactions per month to reach the fee cap. Mercator Advisory Group research indicates prepaid card transaction volumes are not equivalent to debit card transaction volumes, which average some 16-to-18 per month. Prepaid is generally about 25% of that volume, which is some 4-to-6 transactions per month. The result is that the debit function of this card, while laudable for its convenience still needs some work to make it appealing and beneficial to the end user.

From the San Francisco Chronicle:

On Monday, Michelle Jun, a senior attorney with Consumers Union who is the lead expert on prepaid cards, said the changes are a “step in the right direction” but that the card still has many fees. She believes a card with a government endorsement should be among the most affordable on the market. But compared with many other cards, Oakland’s “fees are definitely high.”

Click here to read more from the San Francisco Chronicle.

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