Post-Durbin, many issuers of prepaid debit cards have introduced higher fees upon their cardholders when they make a purchase with their PIN, but new data from the Federal Reserve shows that two-tiered pricing schedules are out-of-synch with the empirical results.

On May 1st, the Fed published a report on its examination of actual interchange prices on a per-transaction basis. The data compared signature transactions with PIN transactions. Networks (more…)

Let’s acknowledge that someone has to pay for everything.

When Visa and MasterCard impose a fee on credit and debit card transactions, retailers have to pass on their costs through higher prices. If you use a credit card, VISA and MasterCard generally charge between 1 and 2 percent of the transaction amount. With a debit card, the fees are lower. Using a card with miles or another rebate costs more. Using the card (more…)

Prepaid debit cards are a nightmare.

If you have ever looked into one of these cards, you will be shocked to see just how bad they are.  Short of payday loans, it is hard to imagine a more predatory product.  Oh wait, there are those guys in the track suits from North Jersey.  They have a loan product that they would like to offer you.  Its a hard call between that and a prepaid debit card.

Remember, these are not loans.  That may be why they have so little protection.  They work when the consumer loads them a new deposit.

Sometimes, the vendor will charge a fee just for making a deposit.  That fee is often as high as $30 for the first $100 deposit!

Then there are weekly or monthly “service fees.” Sometimes, these are as little as $0.75 per week.  Other times, though, they are up to $5.  The BabyPhat Rushcard is “affordable!” It offers activation fees of just$19.95, “so that you don’t have to pay a monthly fee!”

The BankFreedom Card offers a $9.95 monthly fee and and a $4.95 fee to “cashload” the card.  I asked Kelly, the chat agent, to explain cash load.  She said “click here to take advantage of this deal.” I asked again.  She said “Bankfreedom is easy to use…forget about stamps!”  I asked her, “where is the Schumer Box, to honor the Truth In Lending Act.”  She said, “One million ATMs accept your BankFreedom Mastercard!”

Actually, I didn’t expect a Schumer Box.  These aren’t loans.  They are just deposits that are accessible through a card.  So, although they don’t come with any consumer lending protections, they still ought to be relatively free of fees because its almost entirely electronic.

The banks avoid these products.  Instead, the cards are offered by a bunch of never-heard-of-fly-by-night companies.  True, they partner with MasterCard and Visa, but they are themselves a mystery.