An article on CreditCards.com takes the prepaid industry to task over disclosures. While disclosure sare important, the article paints the industry with a broad brush.
Reloadable prepaid cards can do most things a checking account can do, and many people use them instead of a bank.
But few cards warn you upfront about all the fees they carry, research by CreditCards.com found. The lack of transparency makes it hard for consumers to pick the one that’s best – and cheapest – to use.
One of its complaints was that workers in payday loan stores were handing over cards without packaging or fee information.
This is a case of workers making a mistake, not a fundamental flaw with the product itself. While the article does point out cards that it thinks are good, it treats the fees and disclosures that come with prepaid cards as some kind of unique instance in financial services.
However, just like prepaid cards, there are bank accounts that charge inactivity fees (https://www.depositaccounts.com/blog/beware-of-inactivity-fees-at-your-bank-or-credit-union.html), and how you use a bank account can make a huge difference in cost, just like with prepaid cards. With bank accounts, one can go right to an account opening page online without ever reviewing the fees and conditions.
All financial service product categories have versions that are good or bad for some customers. It is important that just because there is a problem with one iteration of a product, that an entire class of products is not stigmatized. Prepaid cards provide important financial access for people across the socio-economic spectrum, but it will be the most vulnerable members of society who will be hurt if they are regulated out of existence.
Overview by Ben Jackson, Director, Prepaid Advisory Service at Mercator Advisory Group
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