A number of banks and other entities are starting to offer prepaid debit cards, the re-loadable payment cards that many unbanked consumers use in lieu of bank accounts. The latest to add the cards to its offerings is Chase, which is rolling out prepaid cards this summer.
Bigger players enter the field
Prepaid debit cards are not the kind of first-tier financial product one associates with the big players in personal finance, but a good number of them already do or are starting to offer them. Visa and MasterCard have prepaid debit cards, as does American Express. In the past few months, Wells Fargo and Regions Financial have both started offering prepaid debit cards as well, according to the New York Times.
Yet another large financial institution is entering the prepaid debit card business, according to the Washington Post. JPMorgan Chase is going to start offering a prepaid card at all branches nationwide. It’s called the Chase Liquid card and it is already available at roughly 200 branches, but will be made available at all branches over the summer.
Great service or fee grab
Depending on how one views it, the move by Chase could be either a somewhat gracious extension of services to people who ordinarily wouldn’t be able to bank with Chase or a way to grab fee revenue. Perhaps it’s a combination thereof.
The card carries a $4.95 monthly maintenance fee. A minimum deposit of $25 or more to open the card is required, according to CNBC, but reloading fees are waived if checks or cash is deposited to the card’s account at “reload friendly” Chase ATMs, of which there are 10,500 nationwide. Cash withdrawal from Chase ATMs is free.
However, a little-known benefit of prepaid debit cards for the administering institution is that the Durbin Amendment, the clause of the Dodd Frank Act that limits swipe fees that banks charge merchants, does not apply to prepaid debit cards, according to the Baltimore Sun. The typical debit card, after the interchange fee cap took effect, is 0.25 percent of the transaction. The typical fee for prepaid debit card transactions is 1.70 percent.
Good deals out there
Prepaid cards can, according to CNN, carry better terms than some debit cards tied to checking accounts. For instance, there are more than 22,000 ATMs in the MoneyPass network that Green Dot card holders can use for free. Prepaid cards also won’t overdraft; the card will simply be declined at the point of transaction. Also, terms can vary and there may be ways to get around some fees like withdrawal and reloading fees.
However, the fees on prepaid cards can add up. A Nerdwallet survey found the average prepaid debit card incurs nearly $300 in fees, compared to $110 for most debit card accounts at major banks. Anyone looking to pick one up would do well to shop around to find the prepaid card with the lowest fee structure.
Baltimore Sun: http://www.baltimoresun.com/business/sns-rt-us-jpmorgan-cardbre8470z0-20120508,0,7161777.story