Pre-paid Credit Cards: Friend or Foe?

Imagine the surprise when you open an envelope that arrives in the mail from a company who has already issued you a real Pre-paid Visa Debit Card.  In fact this is happening right now around the country and is cause from some concern among consumers.

The card in question is issued by Metabank under the name Netspend.  Metabank has been around for quite some time, so this is not a fly-by-night operation.  However, there are some concerns and here is why:

Privacy concerns.  Disconcerting is the feeling that some get when they find out that a card has arrived in their mail, completely unsolicited.  What information has this company obtained about you and how did they get it?  Unfortunately, the fact is that this could have come from any number of other financial companies with which you do business or have done business in the past.  If you do not actively sign and send in a statement that states that you do not want your information sold or used by others for marketing purposes – guess what? – it will be used in that manner.

Credit check authorization.  Does Netspend run a credit check on your before they send you the card?  That can only be answered by you and you will need to obtain a credit history in order to see if that was the case.  If they did run a credit check on you without your consent or authorization, then there might be grounds for legal action, but at what cost?  The action has already taken place and you cannot change that fact.  If you are interested in punitive damages, a class-action lawsuit might be in order.  But even that is no slam-dunk win.

Bold marketing tactics.  Telling you that you have been selected because “one of our partners recommended you as a potential card holder” is a slick marketing move.  Also, saying that they have “partnered with financial service providers and websites nationwide” seems to indicate that they could have obtained your information almost anywhere.  That is a cause for concern if your information is out there and that readily available.

Fine print caution.  Here are things you should know before you use this card:

If someone other than you uses this card, it is considered an authorized transaction and you have little recourse which is only a two-day window in which you can dispute the use.

They charge fees. Your account will be charged for various fees like $4.95 for a phone transfer with a live agent. Account maintenance is $5.95 per month unless you use your card within a 90 day period. Fees from an ATM withdraw of $2.50 on top of what the ATM entity will charge you. There is an ATM transaction decline fee of $1.00. A lost or stolen card fee of $9.95 can be assessed. And the big one: Card Fulfillment (Shipping and Handling) fee of $19.95.

Is this pre-paid Visa debit card something to be concerned about or is it a great product with wonderful benefits?  The bottom line is that, yes, the marketing tactics are a little scary, especially if they have that much information on you already in their system.  But, beyond that, this could be just the answer for those having problems obtaining and using a credit card.  And, their offer of a savings account that pays 5.00% APY is very attractive.

Those are the facts.  Now, you make the call of whether this is a card from which you can benefit from or you need to be concerned about.