Three of the largest issuers of prepaid cards will soon begin testing a new fee-disclosure box — placing the details about a card’s cost in plain English right on the card’s packaging. If the box catches on, it could force some of the worst cards out of the market.
The disclosure box is similar to the Nutrition Facts box you see on packaged foods. But this new here’s-what-your-card-cost box is not government-ordained. Rather, it was the Center for Financial Service Innovation, a non-profit focused on improving the financial situations of the unbanked, that designed the box.
So far, Green Dot Corp., Plastyc Inc. and Ready Credit Corp. have agreed to post the box on their packaging. The CFSI hopes other issuers will feel forced to follow suit, as consumers grow suspicious about cards that don’t use the fee-disclosure box.
Something to hide
Prepaid cards have become enormously popular, particularly among the millions of unbanked Americans. But since the cards often serve those with nowhere else to turn, their fees can be high and difficult to understand.
So much so in fact, that we recently compiled a comprehensive list of as many as 12 different popular prepaid cards and their fee structures, including the American Express prepaid card as well as the Approved Card from Suze Orman.
Prepaid cards tend to attract those who cannot afford or do not trust a regular checking account from a bank. A standardized fee-disclosure form like the one championed by CFSI will help consumers compare such cards more easily.
How would Russell Simmons feel?
One of the most egregious offenders for high fees is the RushCard, founded by music mogul Russell Simmons.
A recent article from PYMNTS.com lauded the RushCard for lowering some fees in an attempt to add more users. But even with those changes, it’s unlikely that UniRush, the card’s issuer, will adopt the CFSI box. UniRush fees are still exorbitant. And unless you pay for the expensive RushUnlimited plan, you have to pay each time you swipe, a fee rejected by the more mainstream issuers.
A fee-disclosure box on the RushCard, especially if it sits on racks next to more affordable products from Green Dot or the Approved Card, would certainly drive any fee-conscious consumer away from the product.
While UniRush somehow managed to double its card users over the past two years, self-imposed fee disclosures from rivals may challenge this growth. If the CFSI disclosure box spreads widely, the less affordable products will be pushed out of the market.