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Are prepaid debit cards right for you?

Prepaid cards are gaining in popularity and it's easy to see why: They are considered an easy-to-use alternative to checking accounts, a simple way to give your child their allowance, and provide access to electronic transactions for people who might otherwise not have it. However, what many people don't realize is some of them come with a lot of fees.

Between 2008 and 2012 the amount of money loaded on general purpose reloadable prepaid debit cards almost tripled to a total of $76.7 billion, according to Mercator Advisory Group, which expects that total to more than double by the end of next year.

Some of the reasons for this surge in use: They are safer than cash, have no overdraft fees and guaranteed approval. However, they can have hefty fees and most people don't take the time to check for them.

According to a 2014 Pew study only 32 percent of consumers compared the terms and fees before choosing a card. There is help if you don't like reading all that small print. A report just out from rates the monthly cost of 26 popular prepaid cards based on fees and features.

What they found overall:

  • Prepaid cards have an average of 11 different fees: The highest number was The MoneyGram AccountNow Visa Prepaid Card which had 18 fees. These fees can include an activation charge, a monthly maintenance fee, fees if you sign or use a PIN when you make a transaction or just make a transaction and more. The card with the fewest fees: Bluebird Prepaid Card, which had none.
  • Fees are up by 21 percent compared to a year ago: The average cost was higher for all four of the types of uses they examined; as an Alternative Checking Account (up 53 percent); as a the Child's Allowance Account (up 11 percent); as a the Alternative Check Cashing Tool (up 2 percent); and as Access to Electronic Transactions (up 23 percent).
  • You pay a lot for a celebrity's name on a card: Cards endorsed or founded by Justin Bieber, Lil Wayne, George Lopez and Russell Simmons were between 33 percent and 51 percent more expensive than other cards.
  • Big bank cards can be less expensive: reported that cards from large financial institutions can be as much as 87 percent less expensive than those from smaller firms.

If you're looking for an alternative to a checking account, suggests you use either:

  • Green Dot Gold Prepaid Visa Monthly fee: $5.95 (waived if you make 30 or more purchases a month); no charge to add more money to your card with Direct Deposit. Reloading your card at a retailer can cost up to $4.95.; or
  • Walmart Prepaid Card Monthly fee: $3; no reload fee when you reload using Walmart Check Cashing.

The most expensive in this category, according to Cardhub, was the AccountNow Prepaid Visa Card which had an activation fee of $4.95 and charges for signature, PIN and ATM transactions.

If you want to automate paying your child's allowance, Cardhub recommends the Kaiku Visa Prepaid Card, which only has a $1.95 activation fee and can be reloaded for free through Direct Deposit, Money Gram, Visa Ready Link and PayPal. The card you do not want to use for this, according to Cardhub, is the READYdebit Platinum Visa Prepaid Card which has a $14.95 monthly fee and a $2.50 fee for using an ATM.

Cardhub also suggests the Walmart Prepaid Card as the best option for check cashing. They say the card to avoid is the Emerald Prepaid Card which charges $2.50 per ATM transaction and $2.50 if you don't use the card for three months.

If you're looking for a card that will give you access to electronic transactions, Cardhub suggests Bluebird, Walmart Prepaid or the American Express Serve which only has a $1 monthly fee. It also warns consumers to stay away from the MoneyGram card with its multiple fees.

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