Wright adds that consumers can use many of the prepaid cards "almost fee-free." For example, monthly fees are often waived if you directly deposit wages onto a card or maintain a higher balance, she says. ATM fees can be avoided by using machines within a network. And balance updates are often free if you sign up for text alerts.
But RushCard president Ram Palaniappan says every year since the card was introduced in 2003 it has added services and lowered fees. Most recently, the RushCard eliminated a $19.95 activation fee and reduced the cost of a replacement card from $9.95 to $3.95.
The card also offers online tools to help consumers manage their money, Palaniappan says. "Many people have been able to stay out of payday loans," because of these tools, he says.
Some prepaid card programs say they can help you build a credit history by reporting your bill payments to a credit bureau. The RushCard reports payments to two alternative bureaus — not the three major credit bureaus — and says some of its customers report getting more favorable terms on auto loans as a result.
But credit experts say a prepaid card, used to spend your own money on plastic, won't lead to the creation of that all-important FICO credit score that many creditors use. For that, you must show you responsibly use credit and have that activity reported to the major credit bureaus.
If you want a prepaid card, be prepared to do your homework before you buy one. You can't assume that all cards and fees are alike. And cards sold in stores often only list one or two fees, leaving you to dig through the card's terms online to find out all the rest, says Consumers Union's Martindale.
Also, consider how you would use the card, so you can minimize the fees you would trigger. You don't want a card with high ATM fees if you plan to make frequent withdrawals.
And once you get a card, keep a copy of the fees in your wallet so you don't forget them.