Consumer Reports: Warning about hidden charges in pre-paid debit cards

NEW YORK (WABC) -- Prepaid cards are exploding in popularity.

They can be used to make purchases in stores, online, and to get cash from ATM's.

You can only spend what you load onto the card, so no credit check is needed.

But a Consumer Reports' money adviser found some prepaid cards are much better than others.

Michael Feight takes care of almost all his financial transactions with his green dot prepaid card.

"It's convenient. It's accepted everywhere Visa is accepted," he said.

Feight is very careful how he uses the card and says he's able to avoid almost all fees. But Consumer Reports money adviser's investigation of 26 prepaid cards finds many carry hefty charges.

"You can be charged an activation fee, a 'swipe fee' every time the card is used, a monthly maintenance fee, and even a 'dormancy' fee for not using the card often enough," said Margot Gilman.

Consumer Reports says some of the highest fees are on the Account Now gold Visa prepaid card. It charges $9.95 per month, as much as $4.95 to load money onto the card, and $2.50 for every ATM withdrawal.

And with the netspend prepaid Visa pay as you go card, you're charged every time you use the card.

"For a daily user of the netspend pay as you go card, the 'swipe' fees could add up to hundreds of dollars a year," adds Gilman.

The worst prepaid card in consumer reports' ratings is the American Express for Target.

"You can only reload it at a Target store unless you have a bank account or direct deposit. To get cash from an ATM almost always incurs a fee. And the card isn't FDIC insured," she adds.

But consumer reports did find some cards offer good value and convenience. They include the Emerald Card from H & R Block and the Bluebird Card with direct deposit.

The green dot card is another good choice. As Michael Feight has found, almost all fees can be avoided if you use it 30 times a month and reload with direct deposit.

With most prepaid debit cards, figuring out the fees can be tough. No matter which one you're considering, read the fine print carefully. Also be aware prepaid cards are not protected by law against loss or theft, though most issuers have voluntary protections in place.

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