Features, Not Fees, Are Prepaid's Biggest Issue: Consumer Reports

Prepaid card fees have plagued otherwise successful entrepreneurs and celebrity endorsers, including Suze Orman the Kardashian Sisters and Justin Bieber. But to prepaid card users, fees have left the spotlight.

Many other factors come into play today, says Michelle Jun, senior attorney for New York-based Consumers Union.

"Generally, fees have come down and are stabilizing," Jun says. "But consumers are giving more recognition to a prepaid card being in a network so it can work at an ATM, and that the company offers free customer service."

In recent years, prepaid card providers have taken efforts to provide free and widely available ATM withdrawals. Elan Financial Services' MoneyPass network, which provides access to over 23,000 ATMs, has deals with companies such as Walmart, Kmart and Green Dot. Banking Up and Mitek have worked to provide features such as remote check capture, which are more commonly associated with checking accounts.

Consumers should be evaluating a prepaid card's overall value, convenience of use, its security and whether the card issuer makes fee information accessible and clear, according to Consumer Reports' July findings on prepaid cards.

After surveying and interviewing consumers about the various prepaid factors, Consumer Reports rates the American Express/Walmart Bluebird prepaid card as a top-five card. Others are H&R Block's Emerald Prepaid MasterCard, the Green Dot Visa and MasterCards, and Suze Orman's Approved Prepaid MasterCard with or without direct deposit capabilities.

Consumer Reports says the bottom four cards come up short in at least one but "usually multiple categories." Those cards are the AccountNow Gold Visa Prepaid Card through MetaBank, the Reach Visa Prepaid Card, the Redpack Mi Promesa Prepaid MasterCard and the American Express card for Target.  

Consumer Reports has found that "the leading prepaid cards are still the leaders because they have a better recognition of what the consumer is looking for in a prepaid card," Jun says.

But the top prepaid cards are not very good at letting their customers know why they are so good, Jun adds.

"One surprising thing to me was that even if a card had good features and low fees, it was still hard for the consumer to know about it," Jun says.

Prepaid cards in the Consumer Reports survey also were vague about fraud and re-credit policies, the report states. It also appears the card issuers include protections that they can revoke at any time.

The Bluebird card with direct deposit received the highest ranking from Consumer Reports' 100-point ranking system by tallying 80 points based on its accessibility and clarity, and its security features. The card rated "very good" on value and convenience.

The American Express for Target card was the lowest at 17 points, receiving a good rating in value, but fair ratings in convenience, fee accessibility and clarity; and a poor rating in security. The card is not widely accepted and doesn't provide access to an in-network ATM, the report states.

Prepaid payroll cards were not included in the survey because "it is difficult to put them in the same box" with general-purpose reloadable cards because users can't load funds from other sources on them, Jun says.

"If I get a check from Grandma, I can't put those funds in a payroll prepaid card," she says.