By Nancy Trejos
The Washington Post
Consumers are increasingly turning away from traditional bank accounts and credit cards in favor of a different form of plastic: prepaid cards.
Consumers typically buy them from a retailer, load them with money — sometimes from directly deposited paychecks — and use them at checkout counters or to pay bills online. And the cards are advertised with a phrase rarely used by financial institutions since the beginning of the credit crisis: No credit check necessary.
So it’s no wonder that in 2008, consumers loaded $8.7 billion on prepaid cards that carry Visa, MasterCard, American Express and Discover logos and can be used anywhere, up from about $4 billion the year before, according to Mercator Advisory Group, a research firm that focuses on the payments industry.
Despite the advantages, consumer advocates urge caution because, they said, prepaid cards can come with as many or more fees as credit cards and bank accounts.
Jerry Welch, chairman and chief executive of nFinanse, said that some of the fees have been exorbitant but that it’s only because the industry is relatively new. The nFinanse Visa prepaid card costs $3 to activate, then $2.95 a month for maintenance and $2.95 to reload. There is no charge for customer service.
“There’s a lot of pricing that has been high, but as the market matures, pricing gets tighter, and that’s what’s happening now,” he said.
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