Trouble in Transit – Transit Agencies Move to Offer Open-Loop Cards But Questions Remain

by Ben Jackson 0

When Chicago Transit Authority decided to add an open-loop purse toits new Ventra transit cards, it was criticized for the fees thatriders might need to pay if they decide to use the open-loopfeature. The card costs $5 to obtain, which is refunded into thetransit fare purse if the user registers the card within 90days.

The critiques of the card seem to have been based on theassumption that the card is designed to be a checking accountreplacement or would serve as someone’s sole access to card-basedpayments. In response, the agency did change some of the fees. Iteliminated a live agent customer service fee. It also added asurcharge free ATM network for cash withdrawals.

But the Ventra card is designed to make life easier for allcommuters, not to serve as a cornerstone of the unbanked riders’financial lives. There are plenty of options, both from otherprepaid card programs and from banks to help out those without bankaccounts.

Ventra was originally created so that a rider could use it to payfor fares on El trains, Chicago Transit Authority buses, and thePACE buses in nearby suburbs. As the agency was building cardprogram, it decided to add the open-loop purse to the same card sothat people could use it in coffee shops, convenience stores, andsimilar places along their commute.

The Ventra card’s open-loop purse shows that prepaid cards havemore uses than just being a replacement for checking accounts. Aprepaid card also can serve as a budgeting tool and conveniencetool for people with bank accounts. In the case of a Ventra card, aparent can provide a child with the transit fare to head to theHarold Washington Library, the Art Institute of Chicago, or WrigleyField and load lunch money on the same card. Money loaded onto aVentra card could be a way to pay for a cab on the cold nights whensomeone does not want to stand in the wind on an El platform.

Even in the case of the card being used for a checking accountreplacement, it is not necessarily the worst deal in town. Let’scompare it to a basic Chase and Bank of America checkingaccount.

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Nerdwallet.com contends that Ventra users will pay $188 peryear, according to the Chicago Tribune based on ATM fees and cashloading fees. It is not clear what levels of activity the folks atNerdwallet expect for those things, but given the design of thecard, it seems unlikely that cash loads and ATM activity will bethe primary uses of the card. Instead, a commuter is more likely toload money from their bank account online (for no fee) and thenspend the money at the point of sale for coffee or lunch.

Even assuming that someone did look to the Ventra card as achecking account replacement, the card could still come out as abetter deal. It seems unlikely that someone who needs to load cashwould be able to avoid paying the $8.95 fee on the basic Bank ofAmerica account above, because they would need to visit a teller.They would also be unlikely to meet the minimum balancerequirements of the Chase account to avoid the $12 monthlyfee.

Recently at SourceMedia’s Card Forum conference, a representativefrom NetSpend noted that 40 percent of the loads on their cardshappen outside of normal banking hours, meaning that the value of aprepaid card is measured not only in dollars and cents, but also inaccessibility to financial services. For someone who needs theVentra card to replace other options, that ability to reloadoutside of banking hours would be critical.

Like any other financial services product, the Ventra card hasvalue to customers based on their needs, but it is not aone-size-fits-all product.