Cardholders Warned against Hidden Fees of Prepaid Cards
The credit crunch has knocked some sense into many Americans who have patronized credit cards for several decades now. This, according to experts in the credit industry game. As a result, many consumers have opted for alternative cards.
One of these alternatives is the prepaid card. Once dismissed by many cardholders, prepaid cards are fast becoming popular options for consumers. Unlike ordinary credit cards, prepaid cards need to be reloaded with cash so cardholders can continue using them. As an alternative, they provide cardholders the ability to control their spending. Parents often use prepaid cards to control how their college-bound children are using credit. By allotting only a certain amount of money, parents can limit their college students’ spending.
For cardholders on a tight budget, a prepaid card may be a convenient way to pay for items or services without having to bring cash along. Experts warn, however, that prepaid cards can be more costly than previously thought. In fact, many analysts say that prepaid cards are rife with hidden fees and substantial service charges.
Consumers Union, one of the foremost consumer advocacy groups in the U.S., says that card companies often include hidden fees in most prepaid cards. Most of these fees and charges are never mentioned to cardholders when they apply for prepaid cards, according to some experts. In fact, many of these consumers find out about the fees after receiving their first card statements. Consumer advocates even argue that the fees connected with prepaid cards are considerably more than what ordinary cardholders have to deal with.
For instance, some prepaid cards have activation fees that can be as much as $30. Other brands, on the other hand, come free. Monthly fees are also a common feature on many prepaid cards. These can go for as high as $10 with some card companies charging anywhere from $30 to $100 dollars for annual fees. Using prepaid cards with ATM machines can also get cardholders paying $2 for every transaction. This excludes the additional charge of the banks who allow their ATM machines to be used.
Although card companies allow prepaid cardholders the freedom to check their accounts through the internet or through SMS messages, consumers often have to shell 50 cents to $1 every time they check their balance through ATM machines. Overdraft fees can also be hefty with some cards charging up to $29 every time cardholders exceed the amount they have loaded.
