Prepaid cards seem to make more sense for most people as the free checking is disappearing

Due to the rising costs in the banking sector a recent study has found that prepaid cards are fast catching up as a better financial option for most people. These have even outpaced the checking accounts in most cases.

The general-purpose reloadable cards are those prepaid cards which could be used just like any other debit card and where they can be ‘topped up’ at periodic intervals. However, there are some typical fees involved in activating as well as reloading the cards. These reloadable cards are especially appealing to those who don’t have regular bank accounts as well as those who have a bad credit history and are not eligible for credit. These prepaid cards are a boon for teenagers and college students.

Due to the recent regulations, banks have increased some of their fees and have almost eliminated the free checking accounts in a desperate bid to recover some of the lost revenue. These reloadable cards also offer considerable savings when compared to the traditional checking accounts.

CEO Michael Flores from the management advisory firm, Bretton Woods Inc, conducted the study and found that the reloadable prepaid cards offered consumers a better alternative over the checking accounts as well as check cashing services where the fee charged were as follows:

• The fees on the prepaid cards ranged from $76 to $261 when consumers used the direct deposit option to reload their cards. When the direct deposit option is not used the cost could be anywhere between $184 and $380.
• At any major bank customers pay $218 to $314 annually for the basic checking accounts. These calculations involve 5 overdrafts each year and other associated fees as well.
• For check cashing services, consumers have to pay around $140 to $720 by way of fees.

Most of the consumers are switching to prepaid cards over checking accounts and this has now become a preferred method of doing financial transactions.

Rick Reed who is a self-described ‘freelance tech geek’ dumped his traditional checking account and instead opted for prepaid cards after he was assessed over $400 in overdraft fees. He states that he simply got tired of it. He was quoted as saying that both banks were in the habit of processing deposits after debits irrespective of the order in which it actually happened. The general-purpose reloadable cards offered more transparency with regard to the fees that they charge.