How Prepaid Debit Cards Can Improve Their Image

NEW YORK (MainStreet) -- By many measures, the prepaid debit card industry is booming. During the past few months, new cards have hit the market, existing ones have been enhanced, fees have been reduced and celebrities have entered into partnerships with various companies.

But each new product, feature or face has been accompanied by an equally widening wave of scrutiny, the gist of which is always the same: The cards offer high fees and low incentives to "unbanked" or "uncreditworthy" consumers who shouldn't have to pay for the privilege to spend their own money.

Some criticism or prepaid cards is warranted, but the industry has potential, if only for the opportunity for innovation it affords.

While we think some of the criticism is warranted -- and have dished it out on occasion as well -- we can't help but think the industry has some potential, if only for the opportunity for innovation it affords. (Case in point: What other payment method could get away with doubling as a student ID?)

But in lieu of abolishing all fees -- which isn't likely since they are largely the only way for issuers to turn a profit on the cards -- is there anything providers can do to shake the stigma that's come to be associated with a prepaid card?

We came up with a few ways the industry could improve its image.

Make the actual cost of the card easier to understand.
While the fees driving much of the criticism are generally high, many prepaid providers are good about disclosing them, and fees are usually get their own section on many of their Web sites. The real issue is that these charts and disclosures are so full of clauses and caveats about how the fees are incurred or, more commonly, avoided, it has become very difficult to figure out how much the card is going to actually cost a person to use. As such, it has also become much more difficult to compare one card with another, since the fee structures and accompanying clauses are rarely the same.

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Several card ranking sites recently introduced tools that allow consumers to compare prepaid debit cards by specifying how they plan to use them. If a similar tool was provided by the debit card's issuer, transparency may become less of a point of contention.