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Prepaid Cards: How to Become a Fine Print Warrior

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I don’t encourage the use of prepaid cards, but the industry obviously doesn’t care about getting my blessing. In 2009, there was $18.3 billion loaded onto prepaid cards. And get this: The Network Branded Prepaid Card Association predicts that by the end of 2011, $67.7 billion will have been loaded onto prepaid cards.

These cards are getting more and more popular. I know there are many of you who need these cards because you don’t have a bank account. So if you really must get a prepaid card, you need to protect yourself. Let me tell you, I’ve seen some truly obscene fees in the fine print.

Sometimes the fine print itself is the problem. I’ve seen fine print that wouldn’t expand beyond the size of a small box. Once I magnified it, I could see only a few words per line. I’ve even seen horizontal fine print placed beside vertical fine print—I’m not kidding. But guess what? I’m a fine print warrior so I read it anyway.

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I think the issuer is hoping you just give up on reading the terms and get the dang card. But you’re not going to do that because you’re going to turn yourself into a fine print warrior, too. Really, it’s kind of fun when you find those A-ha! moments and realize you’ve just saved yourself from an outrageous fee.

Hey, don’t tell me it’s boring. This is your money we’re talking about. And if you don’t read the fine print, you and your wallet could be very, very sorry.

First of all, you need to know that there’s no standardization when it comes to presenting fees. Credit cards have the Schumer Box, which contains the APRs and fees. But with prepaid cards, the fees could be in a box or hidden within giant-sized paragraphs. You’ll often see a schedule of fees, but there are usually more fees in the fine print. So don’t stop looking just because you see what looks like an “official” schedule of fees.

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Okay, so here are some fees to look for. If you find some I haven’t mentioned, please post a comment so we’ll all be the wiser.

Activation fee: Also known as a “card issuance,” “set up,” “initiation,” and just plain “card fee.” This usually ranges from zero to $15. Whatever it’s called, it’s a waste of money because there are plenty of cards that don’t charge this.

Monthly maintenance fee: This ranges from about $3 to $14.95 per month. Many cards have this fee. But often, you’ll be able to drop the monthly maintenance fee to zero if you sign up for direct deposit.

Lately, I’m seeing more cards with payment plan options. For instance, you might have a plan option that doesn’t have a monthly maintenance fee but charges you for each transaction. In this scenario, you could be charged $1-$2 for each purchase (PIN transaction fees are usually higher than signature purchase fees) and that’s just the start of the fee parade. Beware of this kind of pay-as-you-go plan because you can literally be nickel-and-dimed to death.

Issuers that offer multiple payment plans also have choices where you opt for a maintenance fee in exchange for a break on other fees. These are the type of plans where you have to think about how often you’ll be using your card and how you’ll be using it.

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Image: Pragmagraphr, via Flickr.com

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