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Consumer group wants local governments to offer best prepaid cards available

Jun 10, 2013 Sean Albert

A consumer advocacy group wants city governments to do more research before issuing municipal prepaid products. Consumers Union, a branch of Consumer Reports, raised concerns after city officials in Oakland, Calif., launched a prepaid card program that featured high fees, according to Imperial Valley News.

The product Oakland provided to citizens was widely scrutinized due to a $2 fee assessed on card users who enrolled for federal benefits programs. An additional $1 fee was charged each time Social Security or unemployment credits were added to the card.

Among the factors that Consumer Union urges cities to consider when establishing similar prepaid programs is the presentation of transparent terms to consumers. It wants information regarding fees clearly conveyed to potential card users before they sign up for a particular program. Consumer Union also is calling for cities to avoid issuing prepaid cards with fees that result from ATM withdrawals or purchases and instead suggests having only a flat monthly rate for the service. Besides reducing expenses for residents, businesses are more likely to see activity and payment from prepaid cards that have lower transaction fees.

Cities that want to create a prepaid program should do so by utilizing cards that offer direct deposit services. Practical Money Skills notes that this helps card users avoid check cashing fees.