How Do Bank Account Fees Compare To Prepaid Card Fees?
If there is one thing most people dislike about bank accounts or bank cards, it’s the amount of fees you pay monthly or annually. What’s more, you always seem to be oblivious to where those fees are coming from. Therefore, when choosing a bank or a payment card, you always want to consider their corresponding fees. In this post, we’ll compare the fees associated with bank accounts versus those for prepaid cards.
When comparing bank accounts with prepaid cards, typically, the biggest argument against prepaid cards is that they include fees, which is true. Prepaid cards do have fees, but so does pretty much every checking account out there. So the issue is not about finding a bank account or a prepaid card without fees, but finding an option that is affordable to you and one that meets your needs.
Time Business Magazine determined that budget-minded people might be better off with checking accounts, where the average monthly fee is $3.99 per month vs. $4.50 for a prepaid card. However, depending on who you are and how you manage your finances, you’ll find that a lot of prepaid card fees can actually be more economical.
The average model customer would pay around $28 in monthly fees for their checking account in comparison to $22 for a prepaid card. Although fees are competitive, prepaid cards are generally more transparent with the fees they charge, allowing people to choose what’s best for them. So, for many people, including people who manage their money responsibly most of the time, a prepaid card can be a better option.
Questionable Bank Fees
Banks have a bad reputation for charging “hidden” fees to their clients. These fees are seen as “hidden” because banks often keep their fees concealed in the fine print. The lack of transparency from banks can cause people to spend more money in fees than they intended.
In a study called “Still Risky: An Update on the Safety and Transparency of Checking Accounts,” Pew Charitable Trusts discovered that banks do not disclose information accurately to their clients. They examined the websites of the 12 largest credit unions and the 12 largest banks in the U.S., and found the following about some of the banks:
· Three banks omitted showing ATM fees from their website
· Four of the banks did not disclose their fees for insufficient funds online
· Four of the banks did not disclose the size of overdraft penalty fees on their checking account home page or other pages describing specific accounts
This lack of transparency builds a sense of mistrust towards banks. In fact, 73% of millennials would prefer to handle their financial services needs with companies such as Google, PayPal, and Amazon rather than their own nationwide bank, according to an article by Forbes.
Additional Prepaid Card Benefits
Prepaid cards also offer additional benefits that checking accounts don’t offer:
1. Minimum Balance Fees: Prepaid cards usually don’t require a minimum balance. Checking accounts, by contrast, require you to have a certain balance or a fee will be charged. The balance can be as high as $4,500.
2. Better Budgeting Tools: Although prepaid card fees can be higher or lower (depending on the provider and the user), prepaid cards are better budgeting tools than checking accounts. People can only spend what they preloaded on the card. The ability to budget better can help prevent paying higher fees.
3. Credit Checks: Prepaid cards don’t require credit checks. Checking accounts often require credit checks to review your financial history, which can prevent you from getting a bank account, depending on your financial past.
Want to learn more about prepaid cards and their associated fees? Visit our contact page where a DCR expert will gladly help you with any questions or concerns.