Some consumers
have embraced the prepaid card as an alternative to traditional bank accounts
and credit cards. Some have bad credit and can’t get a credit card or open a
bank account. Some are trying to avoid
credit card debt and bank fees. But, Consumer Reports recently outlined the
dangers of prepaid cards and revealed that the industry is largely unregulated
and devoid of the usual protections.
The
report cited a variety of hidden fees and a lack of basic safeguards that
expose consumers to risks that could leave them financially devastated. Twenty
six prepaid cards were reviewed and ranked on hidden fees. The best ranked prepaid card was Bluebird (American Express) with no monthly fee and no activation fee.American Express for Target ranked worst. Some prepaid cards lacked
transparency about their policies and services, had ongoing monthly fees, and
lacked protection against fraud or bank failure. Many included high fees for “inappropriate”
reasons such as not using the card, needing a replacement card and even for
calling customer service.
