Prepaid debit cards are becoming more affordable with increased competition resulting in fewer fees, but the booming market still lacks critical consumer protections, according to a new study by the Pew Charitable Trusts.
U.S. consumers loaded some $64 billion onto prepaid debit cards in 2012, more than double the amount in 2009, Pew said. The cards are available at many checkout counters and big banks.
The new report, “Consumers Continue to Load Up on Prepaid Cards,” looked at changes since the Washington, D.C.-based nonprofit research group released its first study on the topic two years ago.
The reloadable cards can be used wherever traditional debit cards are accepted.
Costs vary but can include activation fees and monthly fees, plus ATM, transaction, reload, balance inquiry, statement and dormancy fees.
One of the chief problems, the report found, is that prepaid cards are not covered by the federal laws that protect holders of traditional debit cards tied to checking accounts from loss of funds and liability for unauthorized transactions.
Most prepaid card issuers offer some protections but the coverage is voluntary, can include loopholes and can be revoked without notice, said Susan Weinstock, director of Pew’s safe checking project.
Prepaid card disclosures involving fees and terms often are incomplete, hard to understand and hard to find, she said.