According to the Pew Charitable Trusts, consumers will load an
estimated $200 billion on prepaid cards this year. But if you're
considering one of these cards, you may want to think twice before
you randomly pick one off the rack.
A study released last month by Consumer Reports says there are
significant differences in the value provided by the various cards
on the market. The report highlighted three cards that it says
offer the best deal to consumers.
Seeking the best prepaid cards
Consumer Reports looked at 26 prepaid cards affiliated with a
number of banks, businesses and celebrities. Among the cards
reviewed were offerings from Chase, Walmart and former basketball
star Magic Johnson.
The cards were rated on the basis of their value, fee clarity,
convenience and safety. However, value was the factor that showed
the most significant variation between the cards. No card received
an "excellent" rating for value and only two -- the American
Express Bluebird and the H&R Block Emerald Prepaid MasterCard
-- received "very good" ratings in that category.
Overall, the report recommended only three prepaid cards.
- Bluebird with direct deposit
- H&R Block Emerald Prepaid MasterCard
- Green Dot Card
While Bluebird card without direct deposit was not recommended,
the only difference between this card and the recommended Bluebird
card was the convenience factor. The Bluebird card with direct
deposit was ranked "very good" for convenience while the version
without direct deposit only ranked "good" in this category.
A competitor to checking accounts?
Although prepaid cards aren't likely to replace traditional
and debit cards anytime soon, they appear to be gaining popularity
among those who don't use bank accounts. A 2012 report from the
FDIC found 17.8 percent of unbanked individuals -- those without an
established checking or savings account -- had used prepaid cards
in 2011, compared to just 12.2 percent who had used them in
Some prepaid cards have also been accused of being checking
accounts in disguise. Earlier this year,
Bluebird cards were extended FDIC insurance
, and most cards now offer direct-deposit options that allow them
to function more like checking accounts. If that's not enough, some
cards will even issue checks to users.
As for security, Consumer Reports gave high marks to nearly
every card surveyed. The only card that didn't receive an
"excellent" rating for security was the American Express for Target
card, which received a "poor" score for reasons not disclosed in
Despite the new features they offer and their growing
popularity, even the best prepaid cards may not be a good fit for
everyone. As with most financial products, purchasing a prepaid
card without reading the fine print could lead to some unfortunate