BLOG: Pre-Paid Cards Aren't a Good Alternative to a Bank Account

You are wasting your money on fees when you use a prepaid, check cashing shop or reloadable debit card

I don’t care what anyone says, Suze Orman should be ashamed putting her name on a prepaid card!  She’s using the goodwill she’s built being under the Oprah umbrella!  Oprah needs to shut that down or dissociate herself from this immoral money grab that Suze is selling to the masses.

Prepaid Cards, Check Cashing Stores and Reloadable Debit Cards are NOT the answer to your money woes.  They are simply the newest money issue that you’re voluntarily signing up for! 

I know that these cards are targeted to the low income, uneducated, young and uninformed consumers so let me tell you that there are MANY alternatives to these cards that will allow you to enjoy the protection of the Federal Deposit Insurance Corporation (FDIC).  In simple terms, the FDIC is the independent agency that is the insurance for bank accounts up to $250,000.  Let’s be honest if you’re looking at any of these prepaid cards you don’t have that much money in the bank! 

I’ve spoken to people who don’t use banks and here are a few of the excuses I’ve been told:

• I don’t trust banks
• What if it goes out of business all my money will be gone
• They charge fees
• It’s easier to use a check cashing place
• I don’t NEED a bank account
• AND …. I just never bothered getting one

Well these cards and check cashing places have their own built-in fees but without safeguards.  A big one is that you paint a huge target on your forehead after leaving a check cashing shop since it doesn’t take a genius to realize you likely have cash on you and they don’t reimburse you after being robbed! 

Also when you look at these cards from the Suze Orman to the Walmart Money card they charge fees for just about everything.  A fee to enroll, monthly ‘maintenance’ reload and to use an ATM!  Not that great of a deal if you plan to use them all the time but even more important is that they don’t build your credit history since they don’t report to any of the bureaus. 

There are many reasons you may not want to use a traditional big bank (politically, morally, credit issues, no convenient location, illegal, working for cash) but there are many other institutions that can be used.  I recommend joining a credit union either through work or anyone that is located in your city that you are eligible to join. 

Or you can join a local FDIC insured privately held bank for instance these are banks across the US as well as online.  For example here are a selection of FDIC insured banks:  Alliance Bank, One United Bank, Central Bank of Kansas City, People’s United Bank, Peoples Bank, Interamerican Bank, North Milwaukee State Bank, Hawaii National Bank, Nordstrom Bank and many other local banks that offer their services to the community without onerous fees!

No, it’s more cost effective to open an account at a bank or credit union.  Especially when you take into account we are moving to a cashless society so either join us or have a hard time navigating life! 

Articles:

The Move toward a Cashless Society:  A Closer Look at Payment Instrument Economics

Daniel D. Garcia Swartz, Robert W. Hahn and Anne Layne-Farrar | Working Paper 04-20 http://regulation2point0.org/wp-content/uploads/downloads/2010/04/phpm2.pdf

The Facts About Prepaid Debit Cards, Real Simple http://www.realsimple.com/work-life/money/spending/prepaid-debit-cards-00000000059472/index.html

Checking accounts vs prepaid cards, Suze Orman edition By Felix Salmon (JANUARY 10, 2012) http://blogs.reuters.com/felix-salmon/2012/01/10/checking-accounts-vs-prepaid-cards-suze-orman-edition/

Chasing Fees, Banks Court Low-Income Customers By JESSICA SILVER-GREENBERG and BEN PROTESS, NYT (April 25, 2012) http://www.nytimes.com/2012/04/26/business/chasing-fees-banks-court-low-income-customers.html?hp&pagewanted=all