Shopping for prepaid debit cards, as I did in March and April, makes you appreciate the more orderly world of credit cards.
Take, for example, the Schumer box. That’s the chart on credit card offers that tells you the APR, penalty rates, fees and other important costs. All credit card offers have the chart. Prepaid reloadable debit cards don’t, and they should.
It’s named after Sen. Charles E. Schumer of New York. In 1989, Schumer, then a congressman, was responsible for legislation that required credit cards offers must summarize their most important costs in a simple, standardized format. Without it, key information is buried in the fine print of the terms and conditions.
Such easy-to-compare price tags would be even more useful for reloadable prepaid cards, which are a substitute for a bank account for many people. That’s because if you’re shopping for them in a store, you don’t get to see the terms and conditions until you’ve bought the card and loaded it with some of your money. The terms are inside the packaging. At least with a credit card, you have the opportunity to read through the terms, although few do.
The federal government’s consumer watchdog agency recognized this when it proposed regulations for prepaid cards back in 2014. The centerpiece of the proposals is a model disclosure form that lists common fees on debit card packaging. It also calls for disclosure of three “incidence” fees, such as foreign transactions or getting a replacement card.
I bought 10 prepaid cards while researching my story, “Most prepaid cards fail to disclose fees.” The ones I bought showed only some of their fees on the packaging. Just three of the 10 we looked at met the full standard proposed by the Consumer Financial Protection Bureau.
One common theme: Cards are fond of disclosing fees they don’t charge. “PIN and Signature Transactions: No Fee,” brags the ReadyDebit Visa Gold card. There’s also no fee for direct deposit, the packaging says. Inside the package, the terms reveal that it will cost $1 to obtain a paper statement and $4.95 for international ATM withdrawals, plus a 3 percent fee for foreign currency conversion. As long as the fee disclosure is up to the marketing honchos, without regulators looking over their shoulder, it’s natural for cards to trumpet the fees they don’t charge.
But a fee chart written by marketing is better than none at all. Cards sold at two payday lending chains were handed across the counter without any price disclosure except what it cost to buy the physical card. There was no packaging around the card. Pamphlets with the terms were provided, on request, leaving me to pore through fine print to determine how much it would cost to use the cards. Both companies said it’s their policy to always provide the terms with the card, but clearly, that does not always happen.
The CFPB says it expects to issue its final rule on reloadable prepaid cards in early summer. If the rule requires a standardized price chart, finding the best deal on a debit card should get a whole lot easier.