A previous NerdWallet study found that prepaid debit cards rarely lived up to their promise of transparency and fewer, lower, simpler fees – but that was before the American Express Bluebird and others came onto the scene. Issued by traditional financial institutions, these new offers have simple pricing structures and consistently deliver budgetary control without the steep cost.
New pricing model more familiar and transparent
Traditional prepaid cards often charged “bleeder” fees, levying $1-5 charges for basic services such as ATM use, cash reloads, and even transactions. They would also charge for declines, account opening and closing, and occasionally even allow overdrafts. This a-la-carte pricing model often incorrectly seemed favorable to checking accounts, which charged a monthly fee in lieu of per-incident fees for core services.
However, the new bank-issued cards have a more transparent pricing model, similar to that of checking accounts: A monthly fee, which in some cases can be waived, as well as fees for ancillary services such as paper statements or replacement cards. And unlike checking accounts, consumers will not have to pay for overdraft fees. These cards are far more affordable, and for certain consumers, can even be cheaper than checking accounts at those very same banks.
NerdWallet analysis: Traditional versus bank-issued prepaid
NerdWallet compared 6 bank-issued prepaid cards (as well as the American Express Bluebird) with 31 “old guard” prepaids: 25 pay-monthly cards and 6 pay-as-you-go ones.
We looked at the fees that each category of cards charged for core services such as loading, transactions, ATM use and account maintenance, and found bank-issued cards to be cheaper in almost every case.
We assume that the user does not use direct deposit, does not meet any load requirements and holds the card for one year.
- Core only: Someone who uses only the most basic of services: transactions and cash reloads.
- Price-insensitive: Someone who makes ATM withdrawals and balance inquiries, and calls customer support once per month, even though those services can be costly.
- Heavy use: Someone who uses their card often, with 2 ATM withdrawals and balance inquiries, and 25% more transactions than the core user.
- Decline and loss: Someone who has 4 ATM declines and one lost card in a year.
Median estimated annual cost
|Est. Annual Cost||Bank-Issued||Traditional||Traditional Pay-Go|
|Decline & Loss||$64.40||$221.70||$239.60|
The bank-issued cards cost about the same, irrespective of the consumer’s ATM or transaction habits. This speaks to the cards’ transparency, as a casual consumer would have difficulty calculating a card’s cost as it varies based on his own behavior.
The figures reflect the cost to the consumer, not fees paid to the card: it includes ATM surcharges (estimated at $2.40) and cash reload fees paid to third parties.
Fee breakdown: Bank-issued versus traditional prepaid median fees
|Basic Card Usage|
|In-Network ATM Withdrawal||$-||$2.00||$2.50|
|In-Network ATM Balance Inquiry||$-||$0.50||$0.50|
|% with In-Network ATMs||100%||24%||17%|
|ATM Withdrawal, surcharge-adjusted||$-||$4.40||$4.65|
|ATM Balance Inquiry, surcharge-adjusted||$-||$2.85||$2.90|
|Customer Support Fees|
|Express Delivery Replacement Card||$15.00||$30.00||$40.00|
|Live Customer Service*||$-||$-||$0.75|
|Out-of-network ATM Fees|
|Balance Inquiry, surcharge-adjusted||$1.00||$2.85||$2.90|
|ATM Decline Fees|
|ATM Decline Fee||$-||$0.40||$0.70|
|Decline fee, surcharge-adjusted||$-||$2.40||$2.60|
*Adjusted to account for cards that waive the first live call per month.
Surcharge adjustment: One major benefit of bank-issued cards is that they provide surcharge-free access to ATMs, so consumers can avoid the extra $2-$3 fees. In order to include this cost, we added $2.40 (the average surcharge) to the ATM fee of every card that did not have an ATM network.
Clearly, the new guard of prepaid dominates in every use case. Our prepaid comparison tool shows that in a dynamic comparison, these new bank-issued cards win out nearly every time.
What this means for consumers
While consumers might well find that these prepaid debit cards are cheaper than even the checking accounts at those very same banks, credit unions still offer unconditionally free checking. These might well prove to be the least expensive offer, because they are fee-free even if the consumer does not use direct deposit or meet the minimum balance requirements.
The following tools and articles can help locate or compare free checking accounts:
Assumptions for the various use cases:
|Fee||Incurred per Month|
|Core Only||Price-Insensitive||Decline & Loss||Heavy Use|
|ATM Balance Inquiry*||1||2|
|Live Customer Service||1||1|
|ATM Decline Fee*||1/3|
|Bank-Issued/New Guard||Traditional – Pay Monthly||Traditional – Pay-as-you-Go|
|American Express Bluebird
Capital One Prepaid MasterCard
PNC SmartAccess Prepaid
U.S. Bank Convenient Cash Card
Wells Fargo Prepaid
|AccountNow Gold Prepaid Debit
ACE Elite FeeAdvantage
Baby Phat Prepaid RushCard Pay Monthly*
Baby Phat Prepaid RushCard Unlimited*
Bank Freedom Prepaid MasterCard
Control Prepaid MasterCard
Green Dot Card
H&R Block Emerald Card
Mango Prepaid Debit Card
MetaBank Silver PrePaid
mPower Visa Prepaid Card
NetSpend Prepaid (FeeAdvantage)
nFinanSe Prepaid Debit Card
Tom Joyner Reach Card
TransCash Visa Prepaid
Univision Prepaid Card
Vision Prepaid Premier
Western Union Gold Visa Prepaid Card
Western Union Prepaid Debit Card
Yap Prepaid Debit Card
Young Money Prepaid Card
|AccountNow Visa Classic
ACE Elite Pay-As-You-Go
Baby Phat Prepaid RushCard Pay As You Go*
NetSpend Prepaid (Pay As You Go)
Vision Prepaid Preferred
*We used the average activation fee of the various RushCards (Diamond, Baby Phat, etc.), which equals $9.70.