Prepaid debit cards have become a popular gift for holiday shoppers, and a frequently-used payment option among consumers who either can't or don't want to deal with the hassles of credit card debt. But the fees that are typically associated with these accounts can also cause headaches, according to a report from USA Today. Prepaid cards can carry fees for monthly maintenance, activation, ATM withdrawals and more, quickly leaving some consumers with a negative balance in just a few months if they don't use them right away.
Still, these cards are among the most popular and fastest-growing payment options available, the report said. A MasterCard study on the future of these accounts found it could top $440 billion by 2017, four times higher than the total in 2009.
But the growing popularity of prepaid debit cards has also drawn attention to the associated fees, the report said. A number of consumer groups and lawmakers have recently spoken out against the charges these cards can incur, and noted that they don't offer the same protections against fraud and loss that accounts from banks do. A number of U.S. senators have also voiced opinions, as one introduced legislation to rein in some of the fees, and another called for these accounts to be regulated by the Consumer Financial Protection Agency.
Currently, law mandates that some fees be displayed on the card's packaging, the report said. However, for the full list, cardholders will have to visit a website. Further, the listed charges are often difficult to find.
Companies that issue the cards, however, contend even with the charges, they are less costly than dealing with credit card debt and bank accounts, the report said. In addition, the popularity of the cards has led to more competition from issuers, and driven the cost of the fees down considerably.
These cards have become particularly popular with underbanked consumers who may have had trouble with credit card debt in the past and are now unable to obtain new accounts.