There’s something “trickier” than costumed children lurking in your community these days. A new product has entered the prepaid space, and while it looks like a helpful safety net for prepaid card users, there’s more to this monster than meets the eye. Savvy consumers have learned to avoid the expensive fees associated with payday loans, but what happens when they don’t have enough funds to cover expenses? Some companies have started offering prepaid cards that support negative balances. Others provide short-term consumer loans as an alternative to expensive overdraft fees.
But what’s really going on here?
The fees associated with these products may sound reasonable, but they’re not any better than your average payday loan. For example, SureCashXtra offers a rate of $1.60 for every $10 it adds to your General Purpose Reloadable (GPR) prepaid card to prevent an overdraft charge. That rate is comparable to the average $15 payday loan services charge for every $100 they’ll advance a customer. Those fees are nearly identical. Adding $100 in the form of prepaid card loans through their service would cost $16 – $1 more than the average payday loan service charge. The fees don’t end there, however. You’re still on the hook for any standard reloading fees your prepaid card provider charges for the transaction. At the end of the day, prepaid card loans can cost consumers more money than payday loans.
Ultimately, these services remove the benefits of having a prepaid card. GPR prepaid cards are designed to help consumers spend only the funds they have available. It encourages responsible spending habits and helps consumers take control of their spending. Better to borrow a few dollars from a friend than become dependent on these short-term loans.
Products that allow prepaid cardholders to overspend aren’t helping consumers and they’re threatening to tarnish the prepaid industry. Hopefully this “tricky” trend won’t make it to Thanksgiving.