Recently, we suggested that the problem with credit card regulation was that financial companies are able to arbitrarily create fees, and that there is no regulation which would essentially stop the explosion of instances in which the customer can be charged extra money. For example, unless you use a sophisticated credit card comparison tool, like Card Hub (owned by the same company as this blog), there is really no great way to compare one credit card against another.
Our suggestion was, and is, that the number of fees be limited so that financial products can be easily compared. Lets take prepaid cards as an example. Obviously, a prepaid card company should be able to charge an activation and monthly fee. They should be able to charge a transaction fee (i.e. a fee for every time that you use your prepaid card) and a customer service fee. We are willing to accept perhaps one or two other fees, but beyond this, the explosion of fees does nothing but confuse customers and make them unable to judge the strengths of their plan against another.
We have included here an actual prepaid card fee plan to demonstrate the point. It has no less than 28 different kinds of fees, and barring those services that card provides for free, there are twenty five different ways that this prepaid card plan is able to charge its customers. If we assume that the regulators want to monitor the way prepaid card companies conduct business, we ask, how can that be done when prepaid card plans look like this? No matter what criteria regulators look at to determine whether the company is acting fair and responsibly, more criteria can produced as needed to get around regulation.
Thus, we suggest, again, that the number of different kinds of fees be limited and monitored as the first step towards prepaid card regulation that fosters innovation and competition.
Actual Prepaid Fee Plan:
Online Account Management: FREE; Online Monthly Statement: FREE; SMS/E-mail Alerts: FREE; ACH Transfer Fee (Bank Account to Card Account Transfer): $0.95; Bank Transfer Fee (Card Account to Bank Account Transfer): $0.95; ATM Balance Inquiry Fee (Domestic): $0.95; ATM Balance Inquiry Decline Fee (Domestic & Int’l): $0.95; Bill Pay Fee (Electronic & Paper Check): $0.95; Card to Card Transfer Fee (Buddy Money™): $0.95; Automated Voice Response: up to $0.95; ATM Balance Inquiry Fee (Int’l): $1.95; Paper Statement Fee (per Statement): $2.95; Overdraft Late Fee (per Day)5: $3.00; Live Agent Service Fee: up to $3.95/call; Inactivity Fee6: $3.95; Secondary Card Fee (One-time Fee; per Card; Maximum One (1)): $4.95; Replacement Card Fee: $4.95; ATM Withdrawal Fee (Int’l): $4.95; Cash Advance Fee (Domestic & Int’l): $4.95; PIN Transaction Decline Fee (Domestic & Int’l): up to $9.95; ATM Withdrawal Decline Fee (Domestic & Int’l): up to $9.95; Signature Transaction Decline Fee (Domestic & Int’l): up to $9.95; Bill Pay Fee (Check Cancellation): $9.95; Cancellation Fee (Charged if a check is issued for funds on your Card Account): $14.95; Express Shipping Fee (One-time Fee): $19.95; Overdraft Transaction Fee5: up to $25.00; Activation Fee (One-time fee)7: up to $29.95; Overdraft First Use Charge (One-time fee): up to $29.95.