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The prepaid cards you should, and shouldn’t, have in your wallet

McClatchy-Tribune Information Services

May 16, 2016


With nearly 10 million U.S. households "unbanked" — meaning they have no checking or savings accounts — prepaid cards have become a relatively safe alternative to help consumers manage their money. The amount of money loaded onto prepaid cards grew from less than $1 billion in 2003 to nearly $65 billion in 2012, the U.S. Consumer Financial Protection Bureau has estimated.

Despite their attractive features, some cards come with high and unexpected fees. The bureau is expected soon to finalize a rule ensuring that prepaid card users have error-correction and dispute-resolution rights comparable to protections given to consumers who have checking accounts.

For a report issued last month, Consumer Reports reviewed 20 prepaid cards on four different factors: how much they cost to use; the availability of in-network ATMs and how widely the card network brand is accepted; whether funds are protected by the Federal Deposit Insurance Corp.; and how well fees are disclosed.

Generally, the best prepaid cards have fewer fees and make it easy to avoid them; are insured by the FDIC; offer features comparable to traditional checking accounts; and do a better job of disclosing fees.

"The prepaid card landscape that used to be characterized by high fees has improved dramatically as more low-fee, consumer friendly options have come to market," said Greg McBride, chief financial analyst for Bankrate.com. "The high-fee cards of years past have been marginalized by lower-fee cards that have very transparent pricing."

Some of the most competitive prepaid cards are offered by national and regional banks, with more transparent fee structures and free access to cash via banks’ ATMs and branches, McBride said.

Unlike traditional debit and credit cards, prepaid cards don’t enjoy the same legal protections that limit the financial liability consumers face in the event of fraud or merchant mistakes, although most card issuers provide these safeguards voluntarily, Consumer Reports said.

The top five cards to be used as a substitute for a bank account, as reviewed by Consumer Reports, were:

—American Express-Walmart Bluebird card.

—Chase Liquid Visa.

—Green Dot Prepaid Visa.

—Halogen Reloadable Prepaid MasterCard.

—American Express Serve.

The cards that were reviewed that received the lowest scores:

—PayPower Prepaid Visa Card.

—NetSpend Prepaid Visa, Premier FeeAdvantage Plan.

—Univision MasterCard Prepaid Card.

—AccountNow Gold Visa Prepaid Card.

—.NetSpend Prepaid Visa, Pay-as-you-go-plan.