credit cards

Don't overpay for prepaid debit cards

Compare fees

Consumers Union did a study on prepaid debit card fees and found that they varied "widely from card to card." For example, card activation fees can range from no fee to $29.95, according to the Consumers Union. Many cards also assess monthly fees, ranging up to $10 a month. However, most monthly fees are waived if you set up direct deposit.

Linda Sherry, director of national priorities for Consumer Action, suggests focusing on ATM fees. "The lower the better," she says. "That's the product for you." Sherry adds that once you choose a card, you're locked into monthly maintenance and activity fees that can make it hard to switch to other cards.

To compare prepaid debit card fees, check Bankrate.com's database. Also, some cards offer all-in-one monthly fee plans, adds Jun. She warns consumers to avoid paying overdraft fees, which can run up to $29.

Know your needs

Increasingly, prepaid debit cards have more functions, says Robertson. "A card with currency conversion can be used for travel," she says. "Or, you might want a multifunction card for paying bills." Others are aimed at parents with young kids. For example, American Express now offers a card that lets parents set spending limits.

Because prepaid debit card customers don't receive monthly paper statements, Jun counsels consumers to "pay attention to their transaction history." Statements must be requested and cost $1 to $2, according to the Consumers Union.

"The prepaid market is young and evolving," says Robertson. "Tools will evolve over time. But prepaid debit cards have a lot of good reasons to be used in the market."

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