While they seem like a great way to manage money and control spending, prepaid cards come with a plethora of fees, and if you’re not careful, you’re cashless wallet can turn out to be a costly alternative.
Consumer Action, which champions the rights of consumers in the US, looked deeper into the issue and conducted a Prepaid Card Survey last year.
After examining 28 prepaid cards from 11 issuers, the consumer advocacy group found that cards come with extra charges to cover ATM cash withdrawal, balance inquiries, customer service calls, monthly maintenance and reloading funds, among others.
“Prepaid cards are useful but costly, if you don’t avoid the ‘gotchas’,” the group said in its report.
A closer look at the prepaid cards being offered in the UAE also confirms that there’s no such thing as free lunch. After all, banks need to recoup the overheads and other related costs incurred in their effort to make your cashless shopping convenient and secure. Here are some of the fees you are likely to pay when you take out a prepaid card:
Activation fee
When you sign up to a regular service, such as water and power connection, or a health club membership, you are most likely required to pay an activation fee. The same principle applies to prepaid cards. As soon as you take out one, you will pay a one-time card issuance fee that is charged the first time your card is loaded. At Rakbank, the fee is Dh50. For Travelez users, a standard dirham card will cost Dh30, while a premium card will be Dh80. Cards loaded with dollars will cost $30 for standard and $50 for premium.
Inactivity fee
If you leave your prepaid card idle for quite some time, be prepared to pay an inactivity fee. Rakbank, LoadnShop and MyNetCard prepaid holders who don’t use their card for six consecutive months will get charged Dh10 to be able to use it again.
Reload fee
The funds you load onto your card will be consumed at some point. To continue using your plastic money, you need to reload it with cash, but to do so, you have to pay a fee. Rakbank and LoadnShop collect Dh5 every time you load money into your virtual wallet.
Online purchase fee
When buying stuff online, take into account that the service is not always free. LoadnShop, for example, will be ready to charge a Dh1 fee for online purchases under Dh30.
ATM withdrawal fee
While you don’t have to pay anything when you use your debit card at an ATM machine provided by your bank, your prepaid card is likely to invite fees when you use it to withdraw cash from the ATM. LoadnShop’s withdrawal fee is Dh5 if the transaction is done in the UAE and Dh10 if done abroad. Travelez dirham card users pay Dh2 for withdrawal in the UAE and Dh12 for abroad. Rakbank’s fee is Dh10 or 2 per cent of total withdrawal, whichever is higher, subject to a maximum of Dh20.
Balance inquiry fee
There are times when you want to make sure how much money you have left in your virtual wallet and your first instinct is to run to the nearest ATM. Every balance inquiry request using a LoadnShop card will cost Dh1 in the UAE and Dh2 abroad.
Foreign currency conversion fee
Watch out for additional charges when you use your dirham-loaded card while traveling abroad. Although not all providers may levy a foreign currency conversion fee, some will charge 1.5 to 3 per cent of the transaction amount plus the standard processing fee charged by Visa or MasterCard.
