Friday, December 17, 2010


Are pre-paid credit cards a good deal?  Usually Not.

There has been some press lately about pre-paid credit cards and what a crappy deal they are.  Many places offer these, including Wal-Mart.  And some celebrities are hawking these as well, usually with higher fees tacked on.

What sort of fees?  Well the Wal-Mart link above lists them thusly:

Standard Fees
One-time Temporary Card Issuance Fee at Walmart Store
- Standard Walmart MoneyCard $3.00
- Student Edition Walmart MoneyCard $6.00

Reload Personalized Card at Walmart (No Check Cashing) $3.00

Reload Personalized Card at Green Dot Varies by Retailer
Location (other than Walmart store)

Additional Personalized Card Fee
- Standard Walmart MoneyCard $3.00
- Student Edition Walmart MoneyCard $0.00

- ATM Cash Transaction - Domestic $2.00

ATM Cash Transaction - International $2.00

ATM Balance Inquiry $1.00

Monthly Maintenance Fee $3.00

Teller Cash Transaction $2.00

Lost/Stolen Replacement Personalized Card $3.00

Rush Delivery of Personalized Card $20.00

Foreign Transactions (see section 19) 2%

Yeeowch!  That's a lot of money just to use a credit card.  Imagine, having to pay $3 just for the privilege of giving them money. And its not like VISA ain't making 2-5% off every purchase you make, either!

The problem with these cards, as the Connecticut Attorney General has noted, is that they are targeted toward the poor, and like most deals targeted toward the poor, they are crappy, overpriced deals.  There are fairly hefty fees tacked on for adding money to the card, for going over your balance, or for even checking the balance on the card.  All in all, they are a very expensive way to spend money.  Why not simply pay cash?

Some poor folks view these as an easy way to have a credit card, after your credit rating has been shot to smithereens by poor financial planning.  It is a status thing -being able to whip out plastic, which the poor view as a sign of wealth.

A better alternative is a DEBIT CARD, which usually has NO fees or charges associated with it.  You can get one of these from almost any bank that offers checking accounts, and use it anywhere that VISA or MASTERCARD are accepted.

Um, no fees versus fees.  It seems like a simple choice.

Bank of America offers such a card, with no fees.  It is also an ATM card as well.  You can use it as a Debit card or run it as a Credit Card - either way, it debits your checking account with no extra fees tacked on.  And you can check your balance anytime, for free, by calling a 1-888 number or online.

Bank of America charges a monthly service fee.  However, if you set up your checking account to auto-transfer a minimum of $25 to your savings account, every month, they will waive this fee.  Hardly onerous, and a great way to avoid a $12 service charge.  And yes, you can transfer the money right back into your checking, if you want to, and they still waive the fee.

It is a shame that the poor just keep getting poorer - and usually because they are offered (and accept) the crappiest deals around - payday loans, rent-to-own furniture, pawn shop title loans, buy here pay here used cars, and now these crappy pre-paid credit cards with staggering service fees.

You would think that the less money you have, the closer you would monitor the spending of it.  And you would be wrong.  Because those making the least amount of money in our society really deserve the best deals, not the rawest.  But the best deals are reserved for those smart enough to seek them out - and that usually the type of person who needs them less.

The good news is, you can refuse to be exploited this way, if you choose not to.  Just say NO to crappy deals like pre-paid credit cards with high fees.