Prepaid Cards Give Jobless Secure Payments but Many Fees

May 12, 2011, Written By Bill Hardekopf

A new study by the National Consumer Law Center reviews unemployment compensation on prepaid cards and reports that the people who receive the benefits are also paying fees that they can’t afford to pay.

Forty states now use a prepaid card for paying some or all unemployment compensation (UC) recipients. If a recipient does not have a bank account, getting cash from a UC prepaid card will usually be cheaper than paying the fees to a check casher to cash a paper check. Prepaid cards are more secure and safer than carrying cash. They can also be used to make electronic purchases.

Those are good improvements for UC payments, but prepaid cards aren’t perfect. The have many fees that hit unemployed workers at financially troubled time. According to the study, the typical unemployment compensation check is only $294 a week, barely a third of the average wage. This is a small amount with no room for fees.

The report surveyed all 40 state UC prepaid cards and shows areas for improvement in fee structures and information about cards.

The report shows:

• 22 cards charge fees at network automated teller machines (ATMs), and all charge at out-of-network ATMs, on top of ATM surcharges.
• 24 cards charge ATM balance inquiry fees (ranges from $0.25 to $1.00)
• 24 cards charge denied transaction fees (ranges from 25 cents to $1.50).
• 5 cards charge $10 to $20 overdraft fees.
• 16 cards charge for calls to automated customer service menus.
• 28 cards charge inactivity fees (as high as $3).

The cards also charge fees for transactions using a PIN, teller withdrawal fees and live customer service calls.

Their review shows the best UC prepaid cards are the California and New Jersey cards offered by Bank of America. These cards do no have penalty fees and offer free and ample access to cash and transaction information.

The worst fee is the $10 to $20 overdraft fee that on U.S. Bank cards issued in Arkansas, Idaho, Nebraska, Ohio, and Oregon. The Tennessee card issued by JP Morgan Chase has the most junk fees.


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The information contained within this article was accurate as of May 12, 2011. For up-to-date
information on any of the terms, cards or offers mentioned above, visit the issuer's website.


About Bill Hardekopf

Bill Hardekopf is the CEO of LowCards.com and covers the credit card industry from all perspectives. Bill has been involved with personal finance for over 15 years. He is a frequent contributor to Forbes, The Street and The Christian Science Monitor.
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