Green Dot Should Be Greed Dot

October 12th, 2009. By LucyC

Almost everyone has a tale of woe when it comes to fees charged by bank cards and credit cards, but what about prepaid debit cards—the new kid on the block? 

Reportedly, some 80 million Americans are using these cards in lieu of having a bank account— and it’s proving exhaustively expensive. Why? These types of cards automatically deduct a laundry list of fees, information on which may not be easily found, and which can result in a “Surprise!” zero balance. You know—you put $200 on the card, spend $150 and then go to make a $20 purchase sometime later only to have it declined due to insufficient funds. Where’d the remaining $50 go? To the card company—in fees. 

Take Green Dot . for example. Green Dot is among the largest providers of prepaid debit cards in the US. Here’s a list of their fees that are not put front and center on their marketing materials: 

• ATM Declined Withdrawal:$0.50
• ATM Balance Inquiry: $0.50
• ATM Withdrawal: free at participating ATM’s, otherwise $2.50 per withdrawal.
• Teller Cash Advance: $2.50
• Initial Purchase: Varies by retailer, from $4.95 to $6.95
• Monthly Charge: Waived in any monthly billing cycle when you load at least $1,000 to your card or make 30 purchase transactions, otherwise, $5.95
• Lost/Stolen Card Replacement: $6.00

Who is Green Dot’s largest market? People who can least afford these kinds of fees, and likely may not be able to understand the fine print—immigrants and people on low incomes who do not have access to bank accounts—a much less expensive means of handling purchases, paying bills and other things these cards are often used for.

Recently, Frontline and the New York Times did an investigative piece (above) on the “industry”—which has grown at an alarmingly rapid rate. So much so in fact that congress has instructed federal regulators to have a little looky-loo into the “industry.”

And, what about the term “prepaid”? It seems to be a bit of a misnomer here. As far as I can tell it’s really only the institutions that issue these cards that are prepaid—you prepay their fees.

The whole thing smacks of the excessive bank overdraft fees situation which the federal government is looking at regulating. Interestingly, some people aren’t waiting for the government to enact legislation on overdraft fees, and have filed lawsuits. And the prepaid debit card industry is following suit—no pun intended.

Tags: Green Dot, Prepaid Debit Card

This was posted on Monday, October 12th, 2009 at 5:00 pm and is filed under Financial . Feel free to respond, or trackback. Read our comments policy.