3 prepaid cards worth considering

For the first time Consumer Reports has ranked the best and worst prepaid cards. The investigation found that prepaid card fees have dropped, and that many cards offer some of the same features that come with bank accounts.  But fee information is often hard to find and prepaid cards still lack the safeguards that consumers get with traditional debit cards.

Prepaid cards are the fastest-growing payment method. They're replacing debit and credit cards for purchases of daily essentials and have become an alternative to checking accounts for people fed up with banking fees. The cards are also given to teens, or the college-bound, allowing parents to reload them from afar and oversee spending.

Last year, the Consumer Financial Protection Bureau announced that it was beginning to consider new rules to protect consumers who rely on prepaid cards. Consumers Union, the policy and advocacy arm of Consumer Reports, has urged the CFPB to limit unfair prepaid card practices, require prepaid card issuers to abide by the same mandatory legal protections that cover debit cards linked to bank accounts, and improve prepaid card fee disclosure.

"Not all prepaid cards are created equal," said Michelle Jun, senior attorney with Consumers Union. "Consumers can still end up paying more than they bargain for because fees are often poorly disclosed and can pile up quickly."

Consumer Reports evaluated 26 different prepaid cards based on four factors: value (how much they cost to use); convenience (availability of in-network ATMs, bill pay features, and how widely the card is accepted); safety (whether funds are FDIC insured); and how well fees are disclosed.

The top five cards reviewed by Consumer Reports are the Bluebird card with direct deposit, H&R Block Emerald Card, Green Dot Bank Issued Prepaid card, Approved Card with direct deposit, and the Approved Card without direct deposit.  

For more, see the full ratings and report. And follow these tips for finding and using a prepaid card:

• Make sure the card has all of the features you need.  Many let you make payments electronically or by paper check, and manage accounts with tools like text message alerts. Some let you load money onto the cards by taking a camera phone photo of a check.
• Avoid using prepaid cards to buy gas at the pump or to pay for hotels or rental cards because these kinds of transactions can trigger holds on your prepaid card funds.
• Consider using a regular checking account for most purchases if you can since it will come with a traditional debit card and stronger legal safeguards to protect you from losing your money from fraud or merchant mistakes.

For more advice, see our tips for using prepaid cards.

—Chris Fichera