Prepaid Debit Cards: Buyer Beware, Be Really Aware

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Prepaid debit cards are attractive to certain consumers—immigrants and low-income people in particular—because they can be purchased quickly and easily in drugstores or Wal-Mart, and there’s no I.D. or paperwork necessary. What people who use these reloadable cards often fail to understand is that they’re loaded—overloaded, really—with fees.

Buying such a card costs you $40 to $80 in fees, on average, for the first two months of use, according to the NY Times. An example from the Times:

The MiCash Prepaid MasterCard docks cardholders a $9.95 activation fee. Like many competitors, it then charges numerous recurring fees, including $1.75 for each A.T.M. withdrawal, $1 for each A.T.M. balance inquiry, 50 cents for each purchase, $4 for monthly maintenance, $2 for inactivity after 60 days and $1 for a call to customer service.

In terms of fees, prepaid cards are probably worse than gift cards and regular debit cards and their much-discussed overdraft fees. Which is saying a lot.