Prepaid cards are a better alternative to checking accounts

According to a study conducted in March, it has been found that prepaid cards are a better alternative for most people. Considering the rising costs in the banking sector these are a better option and even out beat checking accounts in most cases.

The general-purpose reloadable prepaid cards are those that can be used like debit cards as they can be topped up at periodic intervals. There are fees involved in reloading and activating the cards. Reloadable cards are especially appealing to most people who don’t have the regular bank accounts and also for those that are not eligible for credit, like people with a bad credit history or teenagers.

With the recent changes that have been brought about banks have increased fees and reduced or eliminated the conventional ‘free checking account’ in order to recover some of the lost revenue. Hence these reloadable cards can offer considerable savings over the checking accounts, states Crystal Wright, spokeswoman for Network Branded Prepaid Card Association that helped in sponsoring the study.

According to the results of the study it was found that reloadable prepaid cards offered consumers an alternative that was very competitive when compared to checking accounts or check cashing services. The fees that charged are as follows:

• The fee for prepaid cards was in the range of $76 to $261 each year if customers used the direct deposit option to add funds onto the card. However, the cost goes up to $184 to $380 if the direct deposit option is not used.
• Each year customers pay around $218 to $314 on a basic checking account at any of the major banks. The calculations are based on 5 overdrafts as well as other associated fees each year.
• For check cashing services consumers pay an additional $140 to $720 each year.

Checking account fees are driving most consumers to prepaid cards now. Consumers prefer prepaid cards over checking accounts because they can pick and choose the fees such as ATM access fees, speaking with a live customer service representative or bill pay. There are also many fees that are waived off when customers use direct deposit.

As the popularity of the card rises there are some prepaid card issuers who are offering a number of services to their customers thereby mimicking some of the features of a traditional bank account. However, consumers must read the fine print before opting for prepaid cards.