No foolin': A bank card with 15 fees

It sounds like an April Fools joke: A prepaid debit card meant to help teens manage their money that includes 15 potential fees. Another card claiming "no hidden fees" that charges $1 every time you use it. And another that charges $1 to talk to a customer-service rep, and 50 cents to talk to a machine!

Those are some of the surprises we found in the wild world of prepaid debit cards, or as they're known in the industry, "general purpose reloadable cards." This type of plastic, a variant of prepaid gift cards, is gaining popularity particularly among folks without bank accounts or without standard checking accounts that would entitle them to bank debit cards. While these prepaid cards don't charge interest like credit cards, their fees can add up fast. Here are some examples:

• The Wachovia Visa Buxx card is intended for teenagers to use in lieu of cash; as the Visa Buxx homepage says, "it's perfect for schoolbooks, everyday errands, travel, and life's little emergencies." And it appears that each of those emergencies has its own fee; in all there are 15 different potential fees. Activating the card costs $12. Each time parents load money onto the card from their bank accounts, the card charges $2. Cash advances from ATMs are $2.50. ATM withdrawals with the card are limited to 2 every 30 days; after that, the card subtracts $1.50 per withdrawal. After more than 7 months of inactivity, the card charges $2. Overdrafts are $20 each.

Visa Buxx cards are marketed by five other banks, none of which list as many fees. But some charge more for certain services. National City Bank charges a $15 annual fee; PAYjr, another Visa Buxx issuer, charges a monthly service fee of up to $4.95, and $10 to receive a paper statement. And to be fair, notes Curtis Arnold, founder of CardRatings.com, a comparison and ratings service for credit-card offers, the Visa Buxx overdraft fees at all the banks are not nearly as high as late fees or over limit fees of credit cards, which can run $39 per month.

• The Prepaid Visa RushCard, marketed by Unirush Financial Services, claims to have no hidden fees. True, its "convenience" fee isn't hidden; it's clearly listed among the other fees, including a $19.95 sign-up charge. But users of the card have to dig deep into the fine-print Terms and Conditions to discover that the convenience fee means you're charged $1 each time you use the card. On the plus side, the RushCard caps the convenience fee at $10 a month.  And it doesn't charge for services like phone inquiries. But you'd better use the card regularly, because after just three months of inactivity, you'll be charged $1.95 a month.

Few alternatives

Michelle Jun, a staff attorney in Consumers Union's West Coast Office in San Francisco, notes that for the "unbanked" or "underbanked"--people who don't want or qualify for checking accounts--employing these cards may be less costly than using check-cashing services to cash their paychecks and money orders to pay their bills. And she acknowledges that for such consumers, there aren't many alternatives. But consumers currently can't compare terms and fees as they can with credit cards, because disclosure isn't standardized. She supports requirement of "Schumer" boxes for each card, disclosing fees and other terms. (The Schumer box is named for the New York Senator Charles Schumer, who sponsored the law creating the standard disclosures.) 

Arnold of CardRatings.com agrees. "With these pre-paid cards, there are long pages of text and no uniform presentation to compare fees," he says. "It's frustrating for me as an expert. You can imagine how frustrating it is for non-experts.

—Tobie Stanger