Hybrid cards, which combine a prepaid account and a line of credit, could help low-income consumers manage their finances and build a credit history, according to payment experts.

"There always has been a need out there for short-term loans, and there always has been a question as to how best to serve them," Ken Paterson, the director of Mercator Advisory Group Inc.'s credit advisory service, said in an interview last week. "The hybrid card combines a short-term loan with the convenience of a prepaid card that can be used at the point of sale."

H&R Block Inc., which offers the MasterCard Inc.-branded H&R Block Prepaid Emerald Card, lets customers have their federal and state income tax refunds automatically deposited into their card account. Cardholders can also receive an Emerald Advance line of credit.

Nancy Mays, an H&R Block spokeswoman, said her company charges a 36% annual percentage rate on the line but can reduce that to 9% if the customer opens a deposit account with H&R Block's thrift unit.

Emerald cardholders were approved for nearly 900,000 lines of credit last year.

Meta Financial Group Inc. of Storm Lake, Iowa, began attaching iAdvance lines of credit last year to its prepaid debit cards, which marketers offer to consumers. The cards can operate on MasterCard or Visa Inc. networks.

MoneyGram International Inc. offers the cards under the name MoneyGram Visa, and the tax preparation company Jackson Hewitt Inc. offers the cards under the iPower name.

Jackson Hewitt customers who have iPower cards can borrow from an iAdvance line in increments of $20.

For every $20 they borrow, they are charged $22.50 to pay off the debt. Cardholders have to request a credit advance either online or through Meta's automated phone system.

"It has to be a conscious decision," said Nicole Pullman, a Meta spokeswoman, and cardholders are discouraged from becoming chronic borrowers.

Kimberly Gartner, an associate director at the Center for Financial Services Innovation, a nonprofit arm of ShoreBank Corp., said that despite hybrid cards' high interest rates, they are less expensive than other forms of credit.

"These cards are priced better than other options — payday loans or bank overdraft fees," Gartner said. "We think hybrid cards really meet the needs of underserved consumers. Many people buy prepaid cards thinking the cards are helping them build credit. The hybrid card helps them build credit."

Adil Moussa, an analyst with Aite Group LLC in Boston, agreed with her assessment of the products.

"Hybrid cards are good for immigrants who don't have credit or individuals who are attempting to re-establish their credit following bankruptcy," Moussa says.

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