Friday, March 27, 2009

Prepaid Cards More than What you Bargained For?

Washington Independent recently published an article that although mentioning that reloadable prepaid cards among the "unbanked" have grown tremendously the past two years according to market research from the Mercator Advisory Group, there are several downsides to using prepaid cards.

The article states that even though prepaid cards don't charge overdraft fees, they still remain expensive to use. Many card issuers can charge up to $10 a month on maintenance fees, not to mention fees for reloading the card and customer service fees. Prepaid cards at times can also incur cancellation fees, depending on the issuer.

So, are prepaid cards expensive in your opinion? What are your thoughts?

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Keith Kirkpatrick said...

Expensive is a relative term, but I think the bigger question for the industry is related to how well these fees are communicated to customers.

There's obviously been a lot of noise being made by folks like Charles Schumer about fees and disclosure, but I think there would be less griping if part of the "disclosure" would be made at the point of sale by those selling cards.

For example, if the clerk simply said, "Ok, here's your gift card. Please read the terms and conditions on the package before you use the card," at least you are directing consumers to the fine print, even if they don't read it.

I do think that you could train clerks to do this--after all, they have successfully gotten clerks to force people to sign their names when purchasing certain over-the-counter drugs like Sudafed.

Randy San Nicolas said...

I agree with Keith's comment "Expensive is a relative term..."

I share some thoughts on a similar article on my Prepaid Enterprise Blog