How much to prepaid cards really cost you?

Insight into gift and prepaid cards comes from many places, and today’s information courtesy of a Wall Street Journal article on the prepaid debit card industry:

Yet customer and processing fees generate only about $11 a month in revenue per active card for NetSpend, estimates analyst Gil Luria of Wedbush Securities. And the average NetSpend customer uses their card for only 11 months before canceling. After servicing and distribution costs, including expenses for signing up new customers, NetSpend’s operating margin is 15%.

That average of $11 a month is a pretty hefty fee and far more than one would guess when buying one of these non-gift prepaid cards.  It is important to note that prepaid non-gift debit cards are not subject to the new gift card rules that came with the Credit Card Reform Act of 2009, and thus can charge greater fees earlier then their gift card bretheren.

It is also interesting to note, that at 15% operating margins, despite the hefty fees, the companies are not getting rich off of these cards.