Prepaid cards are the financial tool of the moment for a growing number of consumers. They are helping consumers to manage their finances, pay bills and take advantage of direct deposit services — all without a bank account.
A new generation of reloadable prepaid cards is giving many consumers a safe, easy and economical way to make purchases online or in person. But, like most consumer decisions, the key to finding the best value is being well informed.
The free education series, produced in partnership by American Express (NYSE: AXP) and Consumer Action, includes an easy-to-read multilingual booklet, two short videos and a question-and-answer guide. For consumers who rely on cash and checks, prepaid is often a good alternative, and those who primarily use debit and credit cards may also find them useful for online shopping, budgeting and distributing funds to family members.
“The prepaid reloadable card industry has historically been laden with hidden fees and confusing terms, but new competition is beginning to change that,” said Alpesh Chokshi, President, Global Payment Options, American Express.“Competition in the prepaid card industry has brought more ‘fee lite’ card options,” said Ken McEldowney, Consumer Action executive director. “But finding the right card is still a challenge. Our new project aims to help consumers compare card offerings and make an intelligent choice about which prepaid card to use.” Mr. Chokshi added: “We’re excited to offer consumers a one-stop shop of resources that will help them find the prepaid card that’s right for them.” For anyone actively shopping for or already using a prepaid card, Consumer Action offers these top three prepaid card tips: 1. Choose a consumer-friendly card.
- Ask about fraud protection and how errors are resolved.
- Look for free customer service.
- All else being equal, pick the low-fee card that offers useful “perks,” like roadside assistance or travel insurance.
- If you’ll be making a lot of purchases, look for a card without transaction fees.
- If you’ll be withdrawing cash, look for a card with a free ATM network.
- If you’ll be traveling abroad, look for a card with a low—or no—currency conversion fee.
- If your card allows you to get cash back when making a purchase at a grocery store, use this option rather than at an ATM where you might incur a fee.
- If checking your balance online is free, don’t check it at the ATM.
- If your card is subject to an inactivity fee, use your card on a regular basis—or spend down and close the account—before you could lose money on inactivity fees.