Highlighting the danger of non-gift prepaid card fees

Prepaid card issues have been pushing non-gift prepaid card since the Federal Reserve finalized gift card rules for the Credit Card Act of 2009 and this recent news blurb (Wall Street Journal Overheard, 3/8/11) perfectly demonstrates the fee traps that exist more than ever in non-gift prepaid cards.  As a reminder, the Credit Card Act of 2009 gift card rules exempt non-gift prepaid cards from the rules on disclosure and fee limits.

Price is everything for Wal-Mart Stores’ customers. So users of its popular prepaid debit card, managed by Green Dot, may be surprised to hear they still run up $3-a-month fees for up to two months even when their balance hits zero.

Many simply never use the card again. But those who do may find these fees and a regular $3 reloading fee deducted. For somebody depositing $100, that adds up to a painful 9% hit.

While monthly maintenance fees are disclosed by Green Dot, the cardholder agreement doesn’t specify that such fees can push account balances into the red. The only place to learn that level of detail is in Green Dot’s SEC filings, notes analyst Thomas McCrohan of Janney Capital Markets. Everybody knows the importance of reading the small print before signing up for a new financial product. But trawling through the 10-Q?

That’s a new low for both puntive fees and lack of disclosure for a prepaid card.