Prepaid Cards Report – 2014

CardHub 2014 Prepaid Card ReportIncreasingly consumers are turning away from traditional checking accounts towards alternative cash management tools including prepaid cards. According to the Nilson Report, “the top 50 largest US Banks and credit union issuers of general purpose prepaid cards accounted for $118.09 billion in spending at merchants in 2013, up 6.1% from 2012”. And according to Mercator Advisory Group Inc., the amount of money loaded on general purpose reloadable prepaid debit cards almost tripled from 2008 to 2012, rising to $76.7 billion. Mercator predicts that number will rise to $168.4 billion by 2015.

Prepaid cards can be a great tool for a lot of people as they are safer than cash and offer no overdraft fees, no bounced checks and guaranteed approval. However, the cost of prepaid cards varies greatly, depending on a customer’s usage and unfortunately, according to a 2014 Pew study, only 32% of consumers compared the terms and fees before choosing a card, while most simply selected a card while in a store. In light of prepaid cards ever-growing role in the personal finance landscape, at CardHub.com we conducted our annual report evaluating the monthly cost of 26 popular prepaid cards based on their fees and features.

In general, prepaid cards serve four primary usage patterns including; 1) An alternative to a checking account; 2) A tool to give your child their allowance; 3) An alternative check cashing tool and 4.) To provide access to electronic transactions. Based on these usage patterns, we came up with four hypothetical scenarios (see Methodology for more details) to determine which card is the most cost effective and convenient for each application. If a card is not suitable for a given application due to its lack of a key feature, it will be disregarded and noted with “Not Suitable.”   Several of the cards that we reviewed have multiple plans that allow consumers to switch from one plan to another depending upon their usage and needs. In those cases, we compared the most affordable plan for each card and denoted the others as “N/A” for that particular scenario.

Key Findings

 

  • Fees have gone up across the board in 2014 by an average of 21% compared to 2013. The average cost was higher for all of the scenarios; the Alternative Checking Account (up 53%), the Child’s Allowance Account Scenario (up 11%), the Alternative Check Cashing Tool (up 2%) and the Access to Electronic Transactions scenario (up 23%).
Cost Comparison Prepaid Cards 2012 vs. previous years

 

  • Celebrity Founded/ Endorsed Cards are 33%-51% more expensive. We reviewed cards endorsed or founded by Justin Bieber, Lil Wayne, George Lopez and Russell Simons.
Cost Comparison Celebrity Vs. Non-Celebrity Prepaid Cards

 
 

  • Prepaid cards have an average of 11 different fees. The MoneyGram AccountNow Visa Prepaid Card had 18 fees that a consumer could run across compared with the American Express Bluebird card with only 2 fees.
  • Annual costs can range from $0 to more than $400, therefore picking the right card is very important.
Alternative Checking Account Child’s Allowance Account Alternative Check Cashing Tool Access to Electronic Transactions
Min Annual Cost $0.00 $23.40 $0.00 $0.00
Max Annual Cost* $360.00 $239.40 $504.00 $251.40
* Accounting for month-to-month payment plans only.
  • Depending upon your usage and needs, up to 31% of cards may not be suitable for your individual needs.
Unsuitable Cards by Scenario
  • Prepaid cards from large banks are up to 87% more affordable than those from smaller institutions. This year we reviewed prepaid cards from five large bank cards including American Express, Chase, US Bank, PNC, and BB&T and found their fees to be significantly lower than the other cards, opening up new more affordable options for prepaid card consumers.
Cost Comparison Prepaid Cards Issued by Large Banks vs. Smaller Institutions

 
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2014’s Best & Worst Cards

 

Alternative Checking Account Child’s Allowance Account Alternative Check Cashing Tool Access to Electronic Transactions Total Number of Fees
BEST Green Dot
Walmart MoneyCard
KAIKU Walmart MoneyCard AMEX Serve
Bluebird
Walmart MoneyCard
Bluebird
MOST EXPENSIVE AccountNow Classic Ready Debit Platinum Emerald Ready Debit Platinum MoneyGram

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Detailed Findings

Alternative Checking Account Child’s Allowance Account Alternative Check Cashing Tool Access to Electronic Transactions Total Number of Fees
AccountNow Gold Visa $19.95 $14.95 $19.95 $15.95 13
AccountNow Visa Card Classic $30.00 $13.00 $22.00 $14.00 15
ACE Elite Prepaid Card – FeeAdvantage Plan $24.32 Not Suitable $37.15 $13.89 15
ACE Elite Prepaid Card – Pay-As-You-Go Plan N/A* Not Suitable N/A* N/A* 16
American Express Serve $8.00 $5.00 $8.00 $0.00 3
Bluebird $8.00 $4.00 $8.00 $0.00 2
BB&T Money Account $3.00 $5.00 $3.00 $5.00 10
Chase Liquid Card Not Suitable Not Suitable $4.95 Not Suitable 8
Green Dot Prepaid Card $0.00 Not Suitable $12.00 $15.85 7
KAIKU Visa Prepaid Card $1.95 $1.95 $1.95 $9.85 16
Mango Prepaid Card Not Suitable $11.66 Not Suitable Not Suitable 4
MoneyGram Prepaid Visa Debit Card $19.95 Not Suitable Not Suitable $15.95 18
NetSpend Prepaid MasterCard – Fee Advantage $24.32 N/A* $37.15 N/A* 15
NetSpend Prepaid MasterCard – Pay-as-You-Go N/A* Not Suitable N/A* $11.94 16
RushCard – Pay-As-You-Go Plan N/A* N/A* N/A* N/A* 14
RushCard – Unlimited Plan $5.95 $7.95 $7.95 $15.85 13
PNC SmartAccess Not Suitable $5.00 $5.00 Not Suitable 9
SpendSmart Prepaid MasterCard Not Suitable $12.36 Not Suitable Not Suitable 8
US Bank Contour Card Not Suitable $4.00 Not Suitable Not Suitable 12
Walmart MoneyCard $0.00 Not Suitable $0.00 $0.00 7
Western Union Prepaid MasterCard Not Suitable $11.51 Not Suitable $10.85 9
Young Money Prepaid Discover Card $21.27 Not Suitable Not Suitable $13.85 7
Emerald Prepaid Mastercard $11.90 $5.00 $42** $5.80 8
Ready Debit Platinum $24.95 $19.95 Not Suitable $20.95 4
Ready Debit Select $18.95 $13.95 Not Suitable $9.95 4
Ready Debit Gold $24.27 $14.61 $24.27 $10.85 11
*”N/A” is meant to indicate that the cost under this scenario is not applicable given that cardholders can call customer service and immediately change their payment plan for free in order to minimize expenses. For example, the Netspend Fee Advantage Plan is listed as “N/A” on Scenario 2 because cardholders can easily switch to the Pay-As-You-Go Plan, which is cheaper.
**Check funds available immediately.

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Methodology

 

CardHub has reviewed 26 prepaid cards based on their popularity and collected fee information from the website of each issuer in order to determine the total cost and eligibility of all cards, under each of the four scenarios that we have designed.

We sent the final results of this report to all the issuers so that they may verify the underlying data. Apart from Young Money Prepaid Card which declined to do so, all issuers have confirmed the accuracy of the data.

In general, prepaid cards serve four primary usage patterns including;  1) An alternative to a checking account; 2) A tool to give your child their allowance; 3) An alternative check cashing tool and 4.) To provide access to electronic transactions. Based on these usage patterns, we came up with four hypothetical scenarios to determine which card is the most cost effective and convenient for each application and applied those scenarios to the twenty-six prepaid plans in our study. If a card is not suitable for a given application due to its lack of a key feature, it was disregarded and noted with “Not Suitable.” Several of the cards that we reviewed have multiple plans. For each scenario, we compared the most affordable of each card’s plan since cardholders can call customer service and immediately change their payment plan for free in order to minimize expenses.

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 cardholder’s habits, the cost and rank order of the cards could change.

Other factors that may change card costs are issuers offering various ways to offset fees, through annual plans, or customers being able to get cash back with purchases, for free, at selected merchants, including grocery, drug and discount stores.

Scenario 1: Alternative Checking Account 

  • This person receives a monthly paycheck of $2,000, is able to use direct deposit, goes to the ATM once a week, makes five purchases using their prepaid card each week, and needs to pay two bills by check per month through online bill pay (i.e. the billers do not accept card payments). How much will each card cost them per month? — 1X monthly fee +1X direct deposit card load fee+ 4X ATM withdrawal fee + 20X purchase transaction fee + 2X online bill pay by check fee = Total monthly cost Note: In order for cards to be suitable for this scenario, they must have, at a minimum, the following key features: direct deposit and online bill pay by check

Scenario 2: Child’s Allowance

  • This person gives their teenager a monthly allowance of $100, using their bank account or PayPal. The teenager goes to the ATM twice a month and makes two purchases using their prepaid card each week. How much will each card cost them per month? — 1X monthly fee + 1X bank transfer card load fee + 2X ATM withdrawal fee+ 8X purchase transaction fee  = Total monthly cost Note: In order for cards to be suitable for this scenario, they must allow funds to be loaded via a bank account or PayPal since most parents would not want to go to the store every time they give their kids an allowance.

Scenario 3: Alternative Check Cashing Tool

  • This person has a monthly income of $1,600, which they receive in weekly checks. Direct deposit is not an option for them, and as a result, they will need to load checks directly to their prepaid card and make ATM withdrawals on a weekly basis. This person will also make three purchases using their prepaid card each week. How much will each card cost them per month? — 1X monthly fee + 4X check reload fee+ 4X ATM withdrawal + 12X purchases  = Total monthly costNote: In order for cards to be suitable for this scenario, they must have, at a minimum, the following key feature: the ability to deposit checks directly into a prepaid card account.

Scenario 4: Access to Electronic Transactions

  • This person has a monthly income of $2,000 and gets paid in cash weekly. They use a prepaid card to pay bills online and to make large purchases so that they are not forced to carry around large sums of cash. For these purposes, they load $250 onto their prepaid card twice a month to pay two bills online and make two debit purchases per week. How much will each card cost them per month? — 1X monthly fee + 2X cash reloads + 0X ATM withdrawals+ 2X online bill pay (electronically) + 8X purchases  = Total monthly cost Note: In order for cards to be suitable for this scenario, they must have, at a minimum the following key features: the ability to deposit cash onto a prepaid card and electronic online bill pay

In determining total cost of each card by scenario, we have used the following:

ATM Fees assumptions: For all scenarios, if the company has a nationwide network of participating ATMs, we assumed that the cardholder could use one of these ATMs and therefore avoid ATM fees. The numbers for all scenarios take into account an average ATM surcharge fee of $2.33 for those cards without an ATM network.

Number of ATM and Purchase Transaction Assumptions: The number of debit purchases cardholders are expected to make under each scenario were based on usage information from The 2009 Survey of Consumer Payment Choice from the Federal Reserve Bank of Boston. According to this survey, the average debit card user makes roughly 20 purchases each month, and given that Scenario 1 involves an alternative checking account, that was the number used. For Scenario 2, we assumed two purchases per week (8 per month) due to the fact that the child using the card only receives a $100 monthly allowance and will make purchases mostly on weekends. Scenario 3 assumes three purchases per week (12 per month) because consumers in this group are more accustomed to using cash and therefore will not make as many purchases with plastic as cardholders in Scenario 1. The consumer in Scenario 4 gets paid in cash and therefore has no need to withdraw money from ATMs and less reason to use the card for purchases since they can use cash for most purchase transactions.  We therefore assumed two purchases per week for this scenario. In addition, some cards charge different fees for signature and PIN transactions, and in those cases we assumed cardholders would make signature transactions because their fees are smaller.

Where fees were presented as a range between two amounts, we have chosen the average amount of the ranged for our cost assessment.

Some cards offer one time bonuses for signing up into different services offered by the issuer, we did not account for those bonuses into our calculations. However, if the bonus was offered regularly, we have included them into the total cost assessment. Similarly, we have given credit to those cards that offer interest rates, and assumed a $1000 balance (Scenario 1 and 3 qualify to earn interest). Based on the amount yielded, we have offset the total monthly cost for the respective scenarios.

We did not consider as online bill pay the ability to use the card’s number directly on a biller’s web page to make payments. Yet consumers should be aware that this is a viable alternative in certain situations.

Number of Fees: To determine to total number of fees charged by an issuer, we reviewed fee schedules and customer agreements online and then asked each issuer to confirm the total number of different fees for each card.

Cash reload fees are often determined by the third party retail establishment where consumers conduct their reload transactions and not by the card issuer, as such, we did not include these fees in the total number of fees.

Suze Orman got out of the prepaid card market in July 2014, after receiving a lot of criticism. As such, The Approved Card is no longer available for new applicants.
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Previous Years Best Cards

 

Alternative Checking Account Child’s Allowance Account Alternative Check Cashing Tool Access to Electronic Transactions Total Number of Fees
2013 BEST – Green Dot
– Bluebird
– AMEX Serve
– Kaiku Visa – Chase Liquid
– PNC Smart Access
– Chase Liquid
– Bluebird
– AMEX Serve
– AMEX
2013 WORST – AccountNow Classic – NetSpend
– Ace Elite
– Green Dot – AccountNow Gold
– Moneygram
– AccountNow
– NetSpend Pay as You Go
2012 BEST – Green Dot – The Approved Card – Chase Liquid N/A N/A
2012 WORST – AccountNow Classic – NetSpend (Fee Advantage)
– ACE Elite (Fee Advantage)
– RushCard – Monthly Plan N/A N/A
2011 BEST – Green Dot – Green Dot N/A N/A N/A
2011 WORST – NetSpend – NetSpend N/A N/A N/A

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POST YOUR COMMENT
Sep 23, 2014
Photo of Chuck J.
By: Chuck Jordan
i like this.
Sep 7, 2014
Photo of Heatherannlacie B.
By: Heatherannlacie Beatty
I still cant get in to create a account yet I get text messages every day saying all is good it has had money for 3 weeks now I'm lost for words the absolute worst card I have ever encountered I have 3 others from different card companies and haven't had a bit of trouble and these Green Dot don't seem to care about its customers other wise I'd be able to reset my password but their automated system wont let me change anything except my pass code and who knows what that is now I've called I've Pleaded they assuring me all is well yet I cant spend my more
Aug 2, 2014
Photo of Jim J.
By: Jim Jackson
Noticeably absent from this 'study' were GoBank - a division of GreenDot Bank and Region's Now prepaid account.

There is a Federal rule against Banks of a certain size offering checks through prepaid accounts though from my research it appears inconsistent.

GoBank is the best Banking alternative available right now. The thing that gives it the edge over Serve or Bluebird is the English as a native language customer service.

From a purely convenience point of view as a cash card Serve is the best. The near 30,000 free cash locations is hard to beat. I would not trust it as a complete Bank alternative due to the customer service language more

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