Oct 6, 2009 5:36 pm US/Eastern
Pre-Paid Debit Cards Can Cost You Extra Cash
NEW YORK (CBS) ―
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Paying for your next purchase could get a whole lot more expensive if you pull out the wrong piece of plastic, CBS station WCBS-TV reports.
CBS
Paying for your next purchase could get a whole lot more expensive if you pull out the wrong piece of plastic,
CBS station WCBS-TV reports.
"They take advantage of people, especially in this times," says Dino Bentralla, a chef from Hell's Kitchen who recently lost his job.
Bentrella gets his unemployment benefits on a JP Morgan Chase debit card. He says each week his payment is electronically loaded. The problem is, however, it gets siphoned off even quicker.
"Every time I use it at the ATM is $1.50 and you have it only two free every month," he says. "Do you think that's fair? It's not for me."
Check cashing businesses used to be the only game in town for people who didn't have access to a checking account, but now pre-paid debit cards are tapping into that market place some 80 million consumers strong.
Customers pay up front for the cards, around $10, carrying the MasterCard or Visa logo. They can use them for purchases anywhere those cards are accepted.
Nearly $9 billion was loaded onto the cards last year, WCBS-TV reported.
Fees are often unknown to customers. They include a first-time activation fee, ATM withdrawal fees, balance inquiries, purchasing fee, monthly maintenance, customer service, even inactivity if you don't use it for 60 days.
"The reason they have fees on these cards is because they can! They know these people have very few other choices, they're not sophisticated and they'll probably just eat these terrible fees," said Linda Sherry of Consumer Action.
Plenty of institutions are making money off these fee-rich cards: the banks, MasterCard and Visa, even New York State, which was paid a fee by Chase Bank to be the sole issuer of its debit cards.
Traditional checking accounts, even for undocumented workers, can be found at cheaper rates. For more information on these and other tips:
Click here for a 2009 credit card survey.
Click here for more links from ConsumerAction.org.
Click here for a Power Point presentation on Banking Basics.
(© MMIX, CBS Broadcasting Inc. All Rights Reserved.)
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