Visa has announced plans to reward prepaid cards that offer shoppers simplified fees and consumer protections.
Among the requirements of this new Visa seal:
- A flat monthly fee with no transaction decline, customer service, balance inquiry or cash back fees.
- No overdraft fees or coverage.
- A consumer-friendly fee disclosure box so customers can more easily understand and compare fees.
- Federal Deposit Insurance Corp. insurance.
The designation, the name of which was not revealed in Visa's press release, will "clear the way for consumers to pick the prepaid product that is right for them," Cecilia Frew, head of US prepaid products for Visa, said in a statement. Visa has said it is a voluntary program; companies working with Visa on prepaid cards will not have to meet the standards and get the designation.
As prepaid cards have moved from fringe financial product to an increasingly-popular budgeting and spending tool, consumer advocates have argued that fee transparency of prepaid cards leaves much to be desired.
The Pew Charitable Trusts recently published a report examining 66 of the most popular prepaid cards and found that, while disclosure is improving, some cards still don't disclose fees for particular services.
It is pushing for a model disclosure form to be printed on prepaid card packaging and elsewhere so consumers can easily comparison shop and understand what fees they may be getting into. Some, like JPMorgan Chase & Co.'s Liquid prepaid card, already have begun adopting Pew's disclosure form.
Meanwhile, the Consumer Financial Protection Bureau has said it is developing a model disclosure form and is working on a proposed rule about prepaid cards and consumer protection. It is soliciting comments from the public on the disclosure form.
Consumers like the cards
Consumers have been embracing these prepaid cards for a number of reasons. A recent survey found that 69 percent of consumers say they like to use the cards for spending control, while nearly two-thirds say it's a good product for people who have struggled with managing bank accounts. See Bankrate's story for more on the pros and cons of prepaid cards.
"More Americans are turning to prepaid cards as a way to manage money, but Pew's research shows that these cards should be made more consumer friendly," Susan Weinstock, who directs consumer banking research at The Pew Charitable Trusts, said in Visa's press release. "Visa is taking an important step forward by acknowledging the importance of clear disclosures and consumer protections."
Because Visa is one of the largest payment processors in the country, its announcement could help "move the market forward to the kinds of simpler fee structures" consumers need, says Suzanne Martindale, staff attorney for Consumers Union.
In the past, the prepaid card market included a lot of players who would "nickel and dime you out of your money" through various fees, but as prepaid cards have become more mainstream, some of the worst actors have fallen out of the market while others have begun revising their fee structures and transparency, Martindale says.
The Visa announcement can help push that trend further forward. "It is encouraging to see they're setting forth these principles, these best practices," she says.
For more on prepaid cards, check out Bankrate's 2014 Prepaid Debit Cards survey.
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