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Depending on the product or provider, underbanked individuals in the U.S. pay an average of $10 to $100 in fees per month for the same financial transactions as those who use traditional checking accounts, according to a study by The Center for Financial Services Innovation. The center, a unit of Chicago-based Shorebank Corp., interviewed 22 prepaid cardholders in the Chicago and Seattle metropolitan areas earlier this year. The research found underbanked prepaid cardholders are using a variety of methods, including check-cashing services, to pay monthly expenses, even though some could pay less in fees per month using a traditional checking account instead, the report found. But many respondents prefer the convenience of a prepaid card and generally do not trust banks, the interviews revealed. In one example, a consumer could have saved an average of almost $13 per month if she used a checking account instead of a prepaid card to pay monthly expenses. The consumer prefers direct debit of payments from her prepaid card because she is uncertain about how long a check will take to arrive and clear, the report found. In another example, a consumer was cashing his check at the employer's bank for free, but paying about $16 per month to reload funds onto a prepaid card. The center suggests "access to and use of direct deposit needs to become ubiquitous." Direct deposit is one of the best ways to reduce fees associated with financial services, the report concludes. The underbanked population also cannot rely only on prepaid cards to pay bills, and prepaid cards are "still missing functionality around check loading and bill payment," the report notes. The center suggests courtesy checks or the ability to send a money order or paper check could be useful prepaid features since some billers do not accept debit payments.
