Prepaid Cards Report – 2011

CardHub-2011-Prepaid-Card-ReportThe growth rate for prepaid card transactions was more than 20 percent between 2006 and 2009 according to the Federal Reserve, making it the most rapidly growing form of electronic payment. With the passing of the Durbin Amendment earlier this year, which did not set limits on interchange fees for prepaid cards as it did for debit cards, the prepaid card market is expected to grow at an even faster rate. Since prepaid cards are becoming more and more prevalent, CardHub.com released a report evaluating the 5 most well known prepaid card issuers on how useful they are based on their fees and features.

Prepaid cards are good for essentially two uses: As an alternative to a checking account, or as a tool to give your child their allowance. With that in mind, we came up with two different hypothetical scenarios to determine which card is the most cost effective and convenient for each use:

  • Scenario 1: Alternative Checking Account
    This person receives a monthly paycheck of $2,000 and goes to the ATM once a week. How much will each card cost him?
    Note: If the company has a nationwide network of participating ATMs, it is assumed that the cardholder can use one of these ATMs and therefore avoid ATM fees.
  • Scenario 2: Child’s Allowance
    This person gives their teenager a monthly allowance of $100. The teenager goes to the ATM twice a month. How much will each card cost them?
    Note: The numbers below assume that the parent is funding their child’s account through either a checking account or PayPal, which allows them to avoid the fee of up to $4.95 if they were to reload the card at a retailer. If the company has a nationwide network of participating ATMs, it is assumed that the cardholder can use one of these ATMs and therefore avoid ATM fees.

The numbers for both scenarios take into account an average ATM surcharge fee of $2.33 for using out-of-network ATMs.

Below is a summary table of both scenarios’ monthly cost for each card.

Alternative Checking Account
Child’s Allowance
Green Dot $0.00 $5.95
NetSpend $24.32 $19.61
AccountNow $19.95 $14.95
American Express N/A $6.66
Capital One $15.17 $11.56

It is important to note that every card has different fees based on the specific usage of each card . How often a person uses an ATM and how much money they load onto the card each month are the most important drivers in the cost of each card, so depending on the cardholders habits, the rank order of the least to most expensive card could change. For example, if a person loads $3,000 instead of $2,000 a month, the monthly cost for the AccountNow prepaid card would come down to $10.00, assuming the cardholder still goes to the ATM once a week. The costs for each card would also change significantly based on how often the cardholder uses an ATM.

Conclusions

Least Expensive Card for Alternative Checking Account: Green Dot

Green Dot is the clear choice for a checking account alternative based on the above scenario. Its fee structure and large number of in-network ATMs allow its users to avoid all fees. Additionally, it offers direct deposit, online bill pay, and has a reasonably large balance limit of $10,000, making it a very practical checking account alternative.

Most Expensive For Alternative Checking Account: NetSpend

Due to monthly and ATM fees, NetSpend is the most expensive option for an alternative checking account based on the above scenario. It is also worth noting that American Express’s prepaid card cannot even be used as an alternative checking account because it does not offer direct deposit and has a low balance limit of $2,500. The absence of direct deposit leaves consumers without a viable option for loading their paychecks onto this card, therefore it was not possible to evaluate the cost for this scenario.

Least Expensive for Child’s Allowance: GreenDot and American Express

GreenDot and American Express are the least expensive options for giving your child their monthly allowance based on the above scenario. The only fee from GreenDot in this scenario is a $5.95 monthly fee charged when you load less than $1,000 per month. The only fee from American Express is a $2.00 ATM fee that you have to pay after the first free withdrawal each month, plus an average $2.33 ATM owner fee for each withdrawal.

Most Expensive For Child’s Allowance: NetSpend

Due to monthly fees, ATM fees and fees associated with loading smaller amounts of money, the NetSpend prepaid card is the most expensive option for a Child’s Allowance, costing $19.61 a month based on the above scenario.

Detailed Findings

The above findings and conclusions are based on the key features of each issuer’s card, including activation fees, monthly fees, ATM fees, cancellation fees, customer service fees, online bill pay, direct deposit, and maximum allowed balances. This data is summarized in the table below.

Green Dot NetSpend* AccountNow* American Express Capital One
Activation Fee Free** Up to $9.95 $0.00 None Free
Monthly Fee Free when you load at least $1,000 or have 30 posted transactions in a month; $5.95 otherwise - $9.95 (Monthly)
$5.00 when you direct deposit at least $500/month
- $69.95 (Annual)
$0.00 when you load $2,500 or more on your Card in a month, $9.95 otherwise None Free when you load at least $500 in a month; $4.95 otherwise
ATM Withdrawal Fees Free at in-network ATMs; $2.50 otherwise - US ATM: $2.50, plus ATM owner fees
- ATM Decline: $1.00″
- US ATM: $2.50
- ATM Decline:$0.40
One free ATM withdrawal per month, $2.00 afterward One free ATM withdrawal per month; $1.95 afterward
In-network ATMs and ATM Surcharge Fees
- Over 18,000 in-network ATMs; no withdrawal fee and no surcharge fees at these ATMs
- A surcharge/ATM owner fee may apply at out of network ATMs
- A portion of cardholders have access to the Allpoint® surcharge-free ATM network; those cardholders are still subject to the NetSpend ATM cash withdrawal fee
- At all other ATMs, both the withdrawal fee and any surcharge/ATM owner fees apply
- Over 6,000 surcharge free ATMs at participating 7-Elevens nationwide; withdrawal fee still applies
- A surcharge/ATM owner fee may apply at out of network ATMs
- No ATM network
- A surcharge/ATM owner fee may apply at all ATMs
- Capital One has over 2,000 ATMs, but they are not nationwide; It is unclear whether or not they charge a surcharge fee for their prepaid cards at their own ATMs, as they have not responded to this question
- A surcharge/ATM owner fee may apply at out of network ATMs
Customer Service Fees None None - None with Direct Deposit
- Without Direct Deposit: Calls to a Customer Service Agent: $1.00 per call; Automated phone system for account information: $0.50 per call
None None
Cancellation &
Inactivity Fees
None Account Maintenance Fee: $5.95 per month*** Card Account Liquidation Fee: $15.95**** None None
Direct Deposit Yes Yes Yes No Yes
Online Bill Pay Yes Yes Yes No Yes
Maximum Balance $10,000 $15,000 $10,000 $2,500 $7,500

Scenario 1 Breakdown:
Alternative Checking Account
4 ATM withdrawals at $0.00 each, given Green Dot’s nationwide fee-free ATM Network

+

$0.00 monthly fee given that the scenario assumes $2,000 of monthly direct deposit

= $0

4 ATM withdrawals at $4.83 each ($2.50 withdrawal fee assessed by NetSpend and $2.33 ATM surcharge fee)

+

$5.00 monthly fee given that the scenario assumes $2,000 of monthly direct deposit

= $24.32

4 ATM withdrawals at $2.50 each (no surcharge at 6,000 nationwide 7-Eleven ATMs)

+

$9.95 monthly fee given that the scenario assumes $2,000 of monthly direct deposit

= $19.95

N/A 1 ATM withdrawal at $2.33 (only ATM surcharge applies to the first withdrawal) and 3 ATM withdrawals at $4.28 each ($1.95 withdrawal fee assessed by Capital One and $2.33 ATM surcharge fee)

+

$0.00 monthly fee given that the scenario assumes $2,000 of monthly direct deposit

= $15.17

 

Scenario 2 Breakdown:
Child’s Allowance
2 ATM withdrawals at $0.00 each, given Green Dot’s nationwide fee-free ATM Network

+

$5.95 monthly fee given that the scenario assumes loading less than $1,000 per month

= $5.95

2 ATM withdrawals at $4.83 each ($2.50 withdrawal fee assessed by NetSpend and $2.33 ATM surcharge fee)

+

$9.95 monthly fee given that the scenario assumes direct depositing less than $500 per month

= $19.61

2 ATM withdrawal fees at $2.50 each (no surcharge at nationwide 7-Eleven network ATMs)

+

$9.95 monthly fee given that the scenario assumes loading less than $2,500 per month

=$14.95

1 ATM withdrawal at $2.33 (only ATM surcharge applies to the first withdrawal) and 1 ATM withdrawal at $4.33 ($2.00 withdrawal fee assessed by American Express and $2.33 ATM surcharge fee)

+

No monthly fee

= $6.66

1 ATM withdrawal at $2.33 (only ATM surcharge applies to the first withdrawal) and 1 ATM withdrawal at $4.28 ($1.95 withdrawal fee assessed by Capital One and $2.33 ATM surcharge fee)

+

$4.95 monthly fee given that the scenario assumes loading less than $500 per month

= $11.56

*For the purposes of this report, we used the NetSpend FeeAdvantage Plan card and the AccountNow Gold Card. Both companies also offer Pay As You Go plans with different fees and services.
**Green Dot – Free online. Up to $4.95 at a retail store. (Up to $6.95 for the NASCAR® Prepaid Visa Card.)
***NetSpend – This fee applies if the card account has not had any activity for 90 days.
****AccountNow – This fee is charged if you decide to close your card account and request a check to bring your balance to zero.

All cards listed above, with the exception of American Express, have the option of free direct deposit to load money onto the card. All companies offer the option of reloading the card at a retailer, with a third party fee of up to $4.95.

Additional Fees:

Green Dot

  • Teller cash advance: $2.50
  • Balance Inquiry at Non-Network ATMs: $0.50
  • Foreign Transaction Fee: 3% of transaction amount
  • Lost/Stolen Card replacement: $4.95
  • Second Card: $4.95

NetSpend

  • Balance Inquiry via toll-free number or ATM: $0.50 each
  • Account-to-Account Transfer via toll-free number: $1.00 each (automated service), $4.95 each (Customer Service Agent)
  • Bill Payment Fee: In addition to the one or more no-cost bill payment methods made available through third-party service providers, a full range of options and applicable fees appear at the Site
  • Pre-authorized Payment Fee: $1.00 each
  • Stop Payment Fee for Pre-authorized Payment: $10.00
  • Intstant Bank Transfer: $5.95 each
  • Check or Additional Statement Mailing Fee: $5.95 each
  • Additional Card Fee: Up to $9.95
  • Lost, stolen or damaged Card Replacement Fee: Up to $9.95

AccountNow

  • Using ATM to obtain balance:$1.00 per transaction
  • Bank Teller Cash Advance: $4.95 per transaction
  • Express Delivery Charge: $40.00 per occurrence
  • Bill Pay Expedited:
    Electronic Payment  $9.95 per request
    Payment by Check  $19.95 per request
  • Bill Pay Stop Payment: $20.00 per request
  • Additional or Replacement Card: One free Card per year for AccountNow Gold Direct Deposit customers, $10.00 per request otherwise.
  • Paper Statement: $2.95 per request
  • Foreign Currency Conversion Fee: 2.95% of transaction amount after conversion

American Express

  • None

Capital One

  • Paper Bill Pay: $0.95 per transaction
  • Foreign Transaction: 1% of the total transaction amount
  • Transaction History  (By Mail): $1.95 per month requested

For questions or more information regarding this report, please contact our media department.

 

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