Products geared toward low-income consumers have typically been offered by payday loan companies, storefront lenders or even big retailers like Wal-Mart Stores. Consumer Reports analyzed the prepaid card industry recently, and here's what it found:

  • Fees can be high, multiple and confusing.
  • Not all prepaid cards provide adequate protection against theft of funds that involve use of either the cards or their account numbers.
  • Promised credit lines or features to build a credit record may be expensive and overstated.
  • Federal deposit-account insurance for prepaid cards applies differently than it does for bank accounts and may be capped at less than the value of all of the prepaid cards issued by a particular card program.

In its analysis the group sampled 16 prepaid cards and found 13 of the 16 charge monthly fees, ranging from $2.95 for the nFinanSe card to $9.95 for the Vision Premier card and the Univision card. It also found 12 of the 16 cards impose fees for checking your balance at ATMs that range from 45 cents to $1 per balance inquiry.

Now some banks are getting into the game in a bigger way. As The Times notes, these banks say they're providing services for customers who might not be able to get banking access without them. That might be true, but it's a weak argument and one that does nothing for the low-income consumer.

Indeed, it seems the costs of banking outside of the traditional methods are higher, and the alternatives for departing banking customers are not much better. In fact, it looks a lot worse according to some of those prepaid card costs.

Here's BB&T CEO Kelly King making the point in a letter to shareholders recently:

"Particularly during these uncertain economic times, the deep and enduring relationships we form with our clients are crucial to both our success and our clients' financial well-being. Unfortunately, the value of these banking relationships has been too easily discounted or even dismissed in recent years as banks have unfairly borne the brunt of blame for the financial credit crisis. We believe it's important for banks like BB&T to reaffirm the value of having a relationship to help our clients meet their financial goals. For example, a national news reporter recently wrote about her experience living without a bank for only one month. In addition to the hassle of trying to pay bills and handle other routine transactions without a checking account, credit and debit cards or direct-deposited paychecks, the reporter was charged $93 in fees during the month for money orders, paycheck-cashing services and the like."

So, the bottom line for now is that the sad state of banking for the low-income consumer is more about picking your poison than anything else.

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