Connecticut BBB Urges Consumers to Consider Pros and Cons of Using Prepaid Debit Cards

Oct. 25, 2010 - PRLog -- Prepaid debit cards make holiday shopping convenient for consumers with credit problems or who don’t have a bank account, but the convenience comes at a cost, in the form of fees.

Here is how they work: Buyers load a predetermined amount of money onto the card and use it like a regular credit or debit card.  Neither a minimum balance nor credit check are required and the card is not linked to any bank account.

There are however, myriad fees associated with these cards, and depending on the issuer, these may include monthly fees, charges for activation, cash withdrawals, balance inquiries, non-use and even customer service.  These fees can add up to a significant sum, especially if the user makes many small transactions.

Connecticut Better Business Bureau President, Paulette Scarpetti, says the different fees are a good reason for consumers to shop around for the best deal.

“These cards are perfect for many consumers, but they may not be economical for everyone, depending on how many transactions they make and the cards’ fee structures.  The number and type of fees can vary from one card to the next so BBB recommends consumers compare the terms of prepaid cards before buying one.”

Here are some typical fees associated with prepaid debit cards:

Activation:               $3.00 - $20.00
Monthly fee:               $3.00 - $10.00
Transactions:            $1.50 per purchase
Cash withdrawal:    $1.00 - $2.50
Inactivity fee:    $10.00 if not used for several months
Balance inquiries:    $00.50 - $1.00


If you have a problem with the card and need help from customer service, there is usually a fee for that as well, from $1.00 to $4.00.

Consumers should keep in mind that fees may quickly drain a card depending on how much money was loaded onto it.  

For many consumers, the benefits outweigh the downside of having to repeatedly pay to use the cards.  Before purchasing one however, the buyer should carefully compare the terms, conditions and fees of several prepaid cards to ensure they do not offset the convenience.

More information on managing personal finances is available in the Managing Credit – Made Simpler section of the BBB website, at /www.bbb.org/credit-management/.

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Founded in 1928, Connecticut BBB is an unbiased non-profit organization that sets and upholds high standards for fair and honest business behavior. For more advice on finding companies and businesses, start your search with trust at www.bbb.org.