This guest post comes via ACE Cash Express, who provides financial services, including payday loans, short-term consumer credit, check cashing, bill payment and prepaid debit card services.
A surprising new study conducted by Michael Flores, an economist and expert on financial institutions, found that consumers who use prepaid debit cards, instead of low balance checking and debit accounts, could save up to 70% in fees. That effectively makes the use of prepaid debit cards significantly cheaper than traditional debit cards from banks.
“There is no question that prepaid cards are a much better option for many consumers,” said Flores. “An objective review of the costs associated with these cards compared to costs of alternatives such as basic bank checking accounts, in addition to the safety and security associated of prepaid cards compared to cash, leaves no doubt that prepaid cards are a smarter option for many.”
The study found that using debit cards from banks will typically cost a consumer up to $350 each year. Those fees come from overdraft charges, minimum balance fees, and automatic teller machine (ATM) fees. Similar annual fees were experienced from consumers that didn’t have access to traditional banking accounts, and used a loose system of money orders and bill-payment services.
Based on the study’s results, the use of prepaid debit cards was overwhelmingly cheaper than any alternative. It was found that prepaid debit cards with direct deposits, like the kind you can get from your local ACE Cash Express, had the lowest cost of use.
You can download and read the full text of the report from NBPCA’s website.
Kelly says: Credit cards are virtually unknown here in France. Most people use debit cards attached to their checking accounts, which almost always come with an overdraft. The fees for going over the overdraft limit can be hefty, up to 18 or 19%. The most effective deterant to exceeding your available resources in my opinion however, is having your payment refused at the cash register- something which doesn’t happen nearly enough in the States in my opinion. Better to have a purchase denied than to incur the massive fees that can go along with going over your limit!