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SellingPrepaid
Are GPR cards cheaper than checking?
he debate continues over whether general pur- that consumers may be surprised at how quickly fees can
pose reloadable (GPR) prepaid cards are more add up," the report said.
affordable than low-balance checking accounts
T for financially underserved, low income indi- Consumers Union compared the fees charged for low
viduals. In November 2013, financial services advisory balance, no-interest checking accounts at several national
firm Bretton Woods Inc. concluded that they are. banks to the fees tied to over a dozen different GPR cards,
including cards managed by Green Dot Corp., NetSpend
In Analysis of General Purpose Reloadable Prepaid Cards: Holdings Inc. and UniRush LLC.
A Comparative Cost Analysis of GPR Cards Using Program
Manager and Issuer Data, Bretton Woods examined data Consumers Union then ran the numbers through its
supplied by prepaid card program managers with transaction profile model, which supposes an average
research conducted by The Payment Cards Center of the consumer in a month pays three bills (two online, one
Federal Reserve Bank of Philadelphia and the Center by check) and makes eight POS purchases, three ATM
for Financial Services Innovation. The researchers then withdrawals, two balance inquiries and two deposits.
filtered their results through the transaction profile model
created by Consumers Union. The researchers found that, based on the financial
habits of its hypothetical consumer, checking accounts
The report concluded that the average amount of fees represented "a cheaper deal than 10 of the 12 prepaid
charged users of GPR cards is approximately half those card programs" evaluated. Additionally, even if checking
charged basic checking account users. The researchers account customers pay monthly fees, they are better
found that the majority of GPR users pay less than $7.50 off in most cases than GPR cardholders, according to
per month in fees, compared to basic (meaning low Consumers Union.
balance) checking account fees that range up to $13.95
per month. Different conclusions
But using Consumers Union's own transaction model,
Bretton Woods said that, over the last three years, the Bretton Woods discovered the exact opposite. In 2011,
average costs that consumers incur for checking accounts a basic bank checking account cost between $179 and
have been increasing while costs have been decreasing $464 per year, while a GPR card (that comes with direct
for GPR cardholders. At the low end, the yearly costs of deposit) ranged from $97.56 to $238.95, according to
basic checking accounts rose from $60 in 2010 to $250 in Bretton Woods. However, those numbers jumped to
2013. In that same time, GPR card costs reduced from $265.92 to $333.75 for GPR cards that did not feature
$76.35 in 2010 to $58 in 2013.
direct deposit, the researchers said.
The researchers concluded that the trends are Bretton Woods noted that community banks, especially
"unmistakable and undeniable"; GPR cards have a those with under $1 billion in assets, are struggling to
"demonstrable cost advantage" over checking accounts. devise business models that withstand 21st century
"While similar to checking accounts, prepaid cards serve pressures, such as changing consumer behaviors and loss
unique markets and needs and are a textbook example of fee income due to regulation. GPR cards are seen as
of the market filling a need in a responsible manner," a way to "both meet the needs of existing consumers as
Bretton Woods said.
well as attempt to meet the needs of the low to moderate
Contradictory research consumer," the researchers said.
Bretton Woods' findings directly contradict Consumers Finally, while the Consumers Union's 2011 analysis found
Union research. In April 2011, the research and consumer that GPR card fee schedules were difficult to find on
advocacy arm of the organization that publishes Consumer websites and sometimes the information was presented
Reports, issued a report that claimed most prepaid cards in a confusing manner, Bretton Woods discovered recent
charge higher fees than basic checking accounts. improvements in the fee disclosure department. "Most
GPR card providers' fee disclosures are within one click
Consumers Union found that, in comparison to GPR from the home page," the firm said, adding that bank
cards, consumers can save more money and enjoy websites fared worst, with "some complete fee disclosures
stronger protections with basic checking accounts. "Some two or more clicks away."
prepaid card issuers do such a poor job disclosing fees
33
33
Are GPR cards cheaper than checking?
he debate continues over whether general pur- that consumers may be surprised at how quickly fees can
pose reloadable (GPR) prepaid cards are more add up," the report said.
affordable than low-balance checking accounts
T for financially underserved, low income indi- Consumers Union compared the fees charged for low
viduals. In November 2013, financial services advisory balance, no-interest checking accounts at several national
firm Bretton Woods Inc. concluded that they are. banks to the fees tied to over a dozen different GPR cards,
including cards managed by Green Dot Corp., NetSpend
In Analysis of General Purpose Reloadable Prepaid Cards: Holdings Inc. and UniRush LLC.
A Comparative Cost Analysis of GPR Cards Using Program
Manager and Issuer Data, Bretton Woods examined data Consumers Union then ran the numbers through its
supplied by prepaid card program managers with transaction profile model, which supposes an average
research conducted by The Payment Cards Center of the consumer in a month pays three bills (two online, one
Federal Reserve Bank of Philadelphia and the Center by check) and makes eight POS purchases, three ATM
for Financial Services Innovation. The researchers then withdrawals, two balance inquiries and two deposits.
filtered their results through the transaction profile model
created by Consumers Union. The researchers found that, based on the financial
habits of its hypothetical consumer, checking accounts
The report concluded that the average amount of fees represented "a cheaper deal than 10 of the 12 prepaid
charged users of GPR cards is approximately half those card programs" evaluated. Additionally, even if checking
charged basic checking account users. The researchers account customers pay monthly fees, they are better
found that the majority of GPR users pay less than $7.50 off in most cases than GPR cardholders, according to
per month in fees, compared to basic (meaning low Consumers Union.
balance) checking account fees that range up to $13.95
per month. Different conclusions
But using Consumers Union's own transaction model,
Bretton Woods said that, over the last three years, the Bretton Woods discovered the exact opposite. In 2011,
average costs that consumers incur for checking accounts a basic bank checking account cost between $179 and
have been increasing while costs have been decreasing $464 per year, while a GPR card (that comes with direct
for GPR cardholders. At the low end, the yearly costs of deposit) ranged from $97.56 to $238.95, according to
basic checking accounts rose from $60 in 2010 to $250 in Bretton Woods. However, those numbers jumped to
2013. In that same time, GPR card costs reduced from $265.92 to $333.75 for GPR cards that did not feature
$76.35 in 2010 to $58 in 2013.
direct deposit, the researchers said.
The researchers concluded that the trends are Bretton Woods noted that community banks, especially
"unmistakable and undeniable"; GPR cards have a those with under $1 billion in assets, are struggling to
"demonstrable cost advantage" over checking accounts. devise business models that withstand 21st century
"While similar to checking accounts, prepaid cards serve pressures, such as changing consumer behaviors and loss
unique markets and needs and are a textbook example of fee income due to regulation. GPR cards are seen as
of the market filling a need in a responsible manner," a way to "both meet the needs of existing consumers as
Bretton Woods said.
well as attempt to meet the needs of the low to moderate
Contradictory research consumer," the researchers said.
Bretton Woods' findings directly contradict Consumers Finally, while the Consumers Union's 2011 analysis found
Union research. In April 2011, the research and consumer that GPR card fee schedules were difficult to find on
advocacy arm of the organization that publishes Consumer websites and sometimes the information was presented
Reports, issued a report that claimed most prepaid cards in a confusing manner, Bretton Woods discovered recent
charge higher fees than basic checking accounts. improvements in the fee disclosure department. "Most
GPR card providers' fee disclosures are within one click
Consumers Union found that, in comparison to GPR from the home page," the firm said, adding that bank
cards, consumers can save more money and enjoy websites fared worst, with "some complete fee disclosures
stronger protections with basic checking accounts. "Some two or more clicks away."
prepaid card issuers do such a poor job disclosing fees
33
33
