Prepaid debit cards with unexpected fees, drawbacks


But after examining the extensive terms and conditions of 16 prepaid debit cards, Consumer Reports says that's where the similarity ends.

"If your prepaid card is lost or stolen or there are errors on your account, you don't have the same legal protections that you do with a traditional debit or credit card. And there can be lots of fees," said Mandy Walker of Consumer Reports.

Take the AccountNow Gold Visa prepaid card for example. Its fees include a monthly charge of $9.95 unless you've loaded $2500 on the card that month. Using an ATM to withdraw cash costs $2.50, plus $15.95 if you want to close your account and get a check for the remaining balance.

Although some cards imply they can help improve your credit history, Consumer Reports says they can't.

"These are a type of debit card. So the big three credit agencies don't use any of the activity on them to determine your credit score," Walker said.

TV personality Suze Orman's new prepaid debit card is trying to change that in a pilot program with TransUnion, one of the big three credit agencies. But Consumer Reports says it's uncertain how effective that will be.

Companies that sell prepaid debit cards say they are a good alternative for people who don't have a bank account or don't qualify for a credit card. But Consumer Reports says prepaid debit cards should have the same legal protections as traditional debit cards and credit cards, and the fees should be clearly disclosed so people can compare the cards.

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