Consumers Choosing Prepaid Cards to Avoid Bank Fees

by Mercator Advisory Group 0

The Associated Press has come out with a piece on prepaid cards that presents one of the more even-handed appraisals of the industry. It describes how the industry has drawn former bank customers who feel fed up with banks, but raises the issue of balancing bank fees against prepaid card fees.

Most new prepaid card customers are seeking refuge from new and escalating fees, consumer advocates say. Among them: $3 to print an account summary at a Bank of America ATM; $12 a month for checking accounts with a balances below $1,500 at Chase and Bank of America; overdraft fees of $35 that most banks charge.

The article goes on to describe how one prepaid card customer opted for the card over her bank account.

Several $35 overdraft fees over a three month period left Erin Gamboa’s checking account $200 in the red. With her budget too tight to absorb that and other mounting bank fees, the divorced, single mother of two moved her financial life to Green Dot in February. Now, her $850 bimonthly paycheck is deposited directly onto a prepaid debit card. She uses the card to pay for everyday purchases and to pay bills online. She gets a daily text showing her account balance.

While the article mentions the launch of the American Express Prepaid Card, it does not note that its low fee structure may be an inducement for even more bank defections.

Click here to read the article.