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It has been a few months since new card fees, banking rules and overdraft regulations went into effect. Pre-paid cards are potentially a new product that several large banks are considering. These cards would provide a new revenue stream for these big banks. Pre-paid cards are lauded as a fantastic financial option by trade groups. Consumer groups, however, are warning that these cards can come with high fees. Post resource - Expensive alternatives to checking accounts becoming more popular by MoneyBlogNewz.

Growth in the prepaid card market

There was a huge increase in prepaid cards between 3005 and 2009. It went up to 3.4 million from 700,000. The Wall Street Journal explains this growth is not anticipated to stop anytime soon. The amount of pre-paid card users will go up to 7 million. By 2014, this is expected. Payroll cards, not prepaid cards, aren’t involved in this number. Combined, the prepaid card market could account for more than 9 million customers in the United States

Why it might be good to get a pre-paid card

The majority of pre-paid debit cards are offered by non-bank companies. The cards are often marketed in stores offering instant payday loans, convenience stores and grocery stores. Walmart and Target are both stores that offer the pre-paid cards. These larger stores typically will. A consumer with a pre-paid card will be pay much less in fees than a traditional bank account holder according to a report done by Bretton Woods Inc., which Network Branded Prepaid Card Association employed as a consulting firm. When it comes to money management, pre-paid cards are also good. Those with the cards can only spend what is already loaded on. Consumers who don’t have access to a traditional financial institution may also like the idea of prepaid cards.

The argument against pre-paid cards

A report by Consumers Union, the publisher of Customer Reports, says most prepaid cards tend to be more costly than checking accounts. There were 12 cards compared to five checking accounts. Of them, nine were more expensive. There can be fees between $0 and $438 a year for checking accounts depending on what is being used. The fees on prepaid debit cards every year range from $18 to $606 though. Overdraft fees were used in studies on pre-paid cards, the analysis shows. These are not always charged. The Dodd-Frank laws require individuals to sign up for overdraft protection fees if they want them. Only about 22 percent are willing to do this though. Sometimes prepaid cards are more expensive than checking accounts. It depends. It can be a nice idea to get a pre-paid card. Still, those doing this, have to watch out for fees that could be charged with them.

Articles cited

Consumer Reports

news.consumerreports.org/money/2011/04/debit-cards-banks-checking-acounts-fees-consumers-union-analysis.html?EXTKEY=AAOLWP05

Bretton Woods

bretton-woods.com/71501/index.html

Wall Street Journal

online.wsj.com/article/SB10001424052748704377004575651072113863694.html?mod=WSJ_PersonalFinance_PF4