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Prepaid cards users at the risk on increased fees

[Saturday, July 23rd, 2011]

The increase in credit cards fees and charges instigated many consumers in the country to opt for prepaid debit cards, but their happiness seems to be short lived with prepaid card lenders considering the move to increase the fees on these cards. One of the rules that comes into implementation in July stipulates that banks have to charge lesser interchange fees when consumers use their card to shop for various products. In order to make up for the losses incurred due to the reduction in the “swipe” fees, lenders plan to increase the fees on the prepaid cards.

Generally people with poor credit history or from the low income group prefer prepaid cards to build or repair their credit history. But, with the charges on these cards trending northward, they are bound to face problems. In order to overcome the problem, the current rule also outlines an exemption that states that prepaid card lenders can continue charging retailers the regular interchange fees. However, this exemption will take another 12 months for implementation, thereby causing potential problem to card holders.

As per the data available from one of the research firms, Aite Group, 70% of the prepaid card holders earn less than $45000 a year. Most of the users use this card to receive government funds for their living. Bretton Woods Inc, a consulting firm, reveals that the current annual fees on these cards vary from $180 to $320; however, with the increase coming into effect, the minimum annual fees can reach $220.

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