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New competition from national and regional players is helping to moderate prepaid card pricing for consumers, according to a survey released on Monday by Bankrate.com. Indeed, the majority of the 24 cards studied by the North Palm Beach, Fla.-based information service now carry no fees at all for such functions as activation, reloads, bill payment, and inactivity.
The moderation—and outright elimination—of prepaid card fees follows years in which consumer-advocacy groups have decried the proliferation of charges levied by issuers on a wide range of functions. These fees have stirred controversy as banks have also worked to do away with free checking accounts. Many prepaid card users adopt the product as a bank-account alternative. Earlier research by Bankrate.com shows just 39% of banks offer standalone free checking accounts, though 72% of credit unions do.
Greg McBride, senior financial analyst at Bankrate.com, tells Digital Transactions News that new products from large national and regional issuers have much to do with keeping the lid on prepaid card pricing. Perhaps the most celebrated of these new entries is the BlueBird card from American Express Co., which is one of only a few cards in the survey that charges no fee for activation or monthly maintenance. AmEx says the card, which it launched in October, is now eligible for deposit insurance.
“The most significant thing we noticed is that large regional and national banks have introduced offers that are pretty compelling,” says McBride. :You are seeing costs come down with new, more competitive offers, and the competition is having a positive effect for consumers.”
Reloads, for example, are now free among all of the two dozen issuers studied. Similarly, bill payments carry no cost to users at 22 of the issuers, and only seven charge for inactivity. Fees for inactivity range from $1.95 to $5.95 per month and typically start after 90 days of no usage (issuers that charge no inactivity fees may nevertheless close the account after three to six months).
Fees are more prevalent for monthly service, activation, and ATM withdrawals, the survey found. Some 15 issuers have a monthly service fee ranging from $3 to almost $10. But eight of the 15 offer to waive or reduce the fee, Bankrate.com says, under certain condition, for example if the user loads a particular sum onto the card in a given month.
Activation fees run from $2.99 to a hefty $14.95, but two-thirds of the issuers waive them if the cards are purchased online. And 54% charge no fee if the cards are bought in-person. The most common charge is for ATM transactions. All 24 issuers charge for withdrawals, with fees ranging from $1.50 to $2.75 per transaction.
While prepaid card fees may be moderating for now, that’s no guarantee the trend won’t reverse itself, McBride says. “Given the current banking environment, nothing is sacred, [and] all options are on the table,” he notes. “I don’t expect a sea change in 12 months, but just because something doesn’t have a fee today doesn’t mean it’s going to stay that way.”
Besides AmEx, issuers with cards in the survey include Green Dot, NetSpend, PNC, Regions Bank, U.S. Bank, GE Capital Retail Bank (for the Wal-Mart Money Card), and banks that specialize in prepaid card programs, including MetaBank, Inter National Bank, and The Bancorp Bank. The results can be found here.
