The government did us a favor when it created the CARD Act, which reined in banks and credit-card companies that had been collecting millions of extra dollars from consumers.
Thanks to the Card ACT, we gained 21 days to make a payment, 45 days notification of serious changes in terms, the little box on the statements that shows how long it will take to pay off the debt if we only pay the minimum, and more.
Now a new industry has sprung up, devising new ways to separate us from our dollars: the prepaid card, also called the “reloadable” card.
Consumers are invited to use the prepaid cards as they would a bank: deposit a paycheck, have bills automatically paid out of the balance, buy groceries. The cards can be purchased and reloaded nearly anywhere, including convenience stores and big-box stores.
Prepaid cards are becoming big business as more and more people opt out of having regular checking and savings accounts. Some lack good credit; many don’t want to incur credit-card interest; while others simply want the convenience of not carrying cash.
The prepaid cards, however, don’t come with the same protections as credit cards: Those CARD Act laws don’t cover prepaid cards, especially when it comes to fees. If you put, say, $100 on a prepaid card, you’d think you’d have that whole $100 of your own money to spend.
Prepaid cards can come with: purchase fees, activation fees, minimum deposit fees, card-replacement fees, withdrawal fees, ATM inquiry fees, cancellation fees, monthly fees, reload fees, annual fees, PIN fees and even fees to talk to customer service. Prepaid cards generally put a temporary lock on your funds when used at a gas station or for hotels, denying you access to your own money.
Some of the prepaid cards even include a line of credit or overdraft protection. If you don’t keep careful track of the associated fees, you can spend more than you expect and incur debt. There’s also no credit reporting with prepaid cards, which means they can’t be used to build up a credit history.
Instead of paying fees to use your own money, open a bank account and use the debit card that comes with it.
Uffington does not personally answer reader questions, but will incorporate them into his column whenever possible. Write to him in care of King Features Weekly Service, P.O. Box 536475, Orlando, FL 32853-6475, or send e-mail to firstname.lastname@example.org.