Do you use a prepaid debit card, such as a Walmart Money Card or H&R Block Emerald Card, to pay for purchases? If so, you could be paying more in card fees than if you stuck to using a basic bank checking account, says a new study released today by Consumers Union, publisher of Consumer Reports.
The consumer advocacy group says it took a look at 12 popular prepaid cards and compared them to the basic no-interest checking accounts of five banks: Bank of America, Chase, Citibank, US Bank, Wells Fargo, Alliant Credit Union and Golden 1 Credit Union. What the analysis uncovered:
- Some prepaid card issuers do a poor job of disclosing usage fees, such as monthly maintanence fees
- All five checking accounts are cheaper to use than 10 of the 12 prepaid debit cards if consumers took steps to minimize fees
- If customers took no steps to minimize fees, the five basic checking accounts were still cheaper to use than nine of the 12 prepaid accounts
- Monthly fees for four of the five checking accounts are less expensive than the costs associated with nine of the twelve prepaid cards if users took no steps to be mindful of card fees
"There's no question that some banks are adjusting their fees and that consumers may face new charges that increase the cost of maintaining a checking account," said Suzanne Martindale, staff attorney for Consumers Union's Defend Your Dollars campaign. "But checking accounts remain a better deal than prepaid cards because they're still cheaper and they offer stronger protection to consumers."
The analysis also covered some basic tips on minimizing the costs that may pop-up with "free" bank checking accounts. Namely:
- Avoid ATM fee's by sticking with the issuing bank's ATMs
- Link the checking account to a savings account and you might get over-draft protection for free
- Monthly fees might be waived if account holders meet simple requirements—having your paycheck directly deposited into the account, for example
Consumers Union's analysis of specific costs associated with each of the checking accounts and prepaid cards examined can be found on the Defend Your Dollars blog: http://www.defendyourdollars.org/blog.html. Other money-saving tips can be found on Consumer Reports Online Money section.
Prepaid Cards vs Bank Account [Defend Your Dollars]
Fees For Most Prepaid Cards Higher Than Basic Checking Accounts [Consumers Union]
How Prepaid Card Fees Compare to Checking Account Fees (PDF) [Consumers Union]