Average Prepaid Debit Card can Cost Over $300 a Year

Posted on January 30, 2012 by Max

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In a study of 40 popular prepaid debit cards, we found that the average card cost nearly $300 a year in basic fees – before considering activation, cancellation, paper statement and other costs. The single greatest charge tended to be the monthly fee, ranging up to $14.95, but $1-2 charges for transactions and ATM use could easily accumulate to over $20 a month.

We used conservative estimates to calculate the cards’ monthly cost, and excluded other fees, both avoidable and inescapable. Based on our analysis, the average ongoing cost of a prepaid debit card is:

• $297.51 a year with no direct deposit;
• $286.18 a year with $1,000 in direct deposits;
• $284.99 a year with $1,500 in direct deposits;

This calculation excludes:

• $8.35 average activation fee, levied by 23 cards;
• $4.67 average inactivity fee, levied by 14 cards;
• Cancellation, card replacement, ATM balance inquiry and decline fees, among others;

Based on these numbers, it’s easy to see why prepaid debit is a booming industry. Unfortunately, it’s an industry built on nickel-and-diming unwary consumers.

Prepaid debit cards are often marketed to those least able to bear their high costs: students, low-income families, and immigrants, and as the industry explodes, everything from government benefits to tax refunds are offered on prepaid cards. But even the cheapest cards in our database are more expensive than many checking accounts.

How do the most popular cards fare?

The best prepaid options (they’re still not as good as checking)
The winner in our prepaid card list, is the new American Express Bluebird, which charges no monthly or per-transaction fees and allows for direct deposit. The only charge is for ATM withdrawals ($2 apiece) and cash reloads ($1, compared to the average $4.49). To be fair, 2 ATM withdrawals and cash reloads and you’re out $6 a month. But that’s a lot better than most other cards. The one downside is the ATM withdrawal limit: you’re capped at $200 a week, while most cards draw the line at $500 a day. But for its low cash reload fees and simple fee structure, we give the Bluebird Rookie of the Year and best prepaid debit card out there.

But even then, the Bluebird can’t hold up to your everyday checking account. Many credit unions offer absolutely positively no-strings-attached free checking, even reimbursing ATM fees and offering interest or rewards. Online banks, too, give rewards on their free checking accounts. We have a whole list of debit cards and checking accounts right here. Yes, Bank of America and Chase are charging for their accounts, but they’re hardly the only players out there. Free checking is dead. Long live free checking.

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