COLUMBIA, Mo. – Prepaid debit cards are the latest fee-generating vehicles for financial institutions looking to replace revenue lost when credit card fee regulation started in 2010. Prepaid cards have no fee restrictions and can charge for everything from using an ATM to calling customer service.

The Consumer Financial Protection Bureau predicts that consumers will load $167 billion onto prepaid cards by 2014. That’s a lot of dollars loaded onto a wide variety of cards. With so much choice, smart consumers will look for a card that offers the benefits they need without excessive fees.

“If you shop around for the card, you can find one that fits your situation the best, depending on your spending habits, how frequently you buy things and what you want to do with the card,” said Brenda Procter, personal financial planning specialist for University of Missouri Extension.

Out-of-pocket expenses can add up quickly when you consider the long list of potential fees for prepaid cards:

  • Purchase fee
  • Activation fee
  • Monthly maintenance fee
  • Reloading fee
  • Funds transfer fee
  • Purchase transaction fee
  • Denied transaction fee
  • Overdraft fee
  • Cashier withdrawal fee
  • ATM withdrawal fee
  • Balance inquire fee
  • Inactivity fee
  • Card replacement fee
  • Paper statement fee
  • Customer service fee
  • Closure fee

Fees and benefits can vary widely from card to card. For example, many prepaid cards don’t have protection for unauthorized charges or lost or stolen cards.

“Some cards do have those protections, so you need to do some comparison shopping,” Procter said. “Don’t just run to a discount store and buy the first prepaid card you see. If you do, it’s pretty likely you won’t get the best deal you could.”

Prepaid cards can be an option for someone who can’t open a checking account, or as a means for providing funds for a teen, college student or an elderly parent.

“Just make sure that the card doesn’t have future fees that they’ll incur because they don’t understand the card.”

Procter said prepaid cards might be a way to teach money skills to a teen or college student.

“If they run out of money the third week of the month, they’ll learn that you can’t have everything you want, and there are limits to what you can spend,” Procter said. “It’s a lesson that can be learned without going over a credit limit or running up a balance that they can’t realistically pay.”

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