Stored Value Cards - A Costly Convenience?


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Stored value cards (SVCs) offer a convenient alternative for paying the bills or purchasing goods and services, but this convenience may come at a price. There may be a variety of fees associated with the use of some SVCs that you should be aware of before deciding what card may meet your needs.

Have you ever withdrawn money from an ATM machine, paid the machine's withdrawal fee, and later discovered you've been hit with an additional and unexpected fee by the issuer of your SVC? If so, you've found out the hard way about one of the many fees you may be charged for some transactions your card may be used for.

There may be enrollment fees that must be paid before you receive some SVCs, as well as shipping and handling fees. You may also be responsible for a monthly fee, an annual fee or both. According to The Center for Financial Services Innovation, monthly fees can run as high as $12.95 or more, with annual fees of up to $99.95.

You may be charged separate fees for bill payment, transferring money to other accounts, transactions via the phone or the Web, credit reporting fees, or even inactivity fees or fees for reloading the card with additional funds. You may also have to pay for overdraft protection for certain SVCs.

With many SVCs an overdraft isn't possible as only the available funds can be withdrawn. There are some exceptions, however. If you have a fee-based SVC and have any fees withdrawn from it by the card issuer, you could end up overdrawing the card. For example, if you only have $8 in funds stored on the card on the last day of the month, when the issuer charges you a $9.95 monthly fee, your card will be hit with an overdraft. Without overdraft protection on the card, you could wind up with a SVC containing a negative balance and multiple overdraft charges.

Beware of dual fees! In some cases, you may be charged third-party fees to use the card at certain businesses or for specific purposes. Use your SVC at some fast food restaurants and you could be charged a debit fee from the establishment. Withdraw money from most ATMs and you may have to pay the ATM owner an additional fee to withdraw some cash. Dual fees may limit where and for what purposes you want to use your card.

How you plan to use a specific SVC and how much it may cost should factor heavily in what cards you decide are right for you. If there are fees associated with the use of the card, you should find out what these fees are and try to estimate how much it may cost you to use the card every month. In some cases, it may be cheaper to open a low balance checking account if you can keep the minimum required balance in the account.

As always, you should shop around for the best deals in SVC. The industry is exploding and there are many excellent cards available with very low, if any, additional fees. The more information you get on the cards available today, the more you'll save in the long run and get the most bang for your buck from any SVC you choose.
John Campbell is the writer and editor of , the financial portal for the rest of us. Check out Cashbuzz for the latest articles on money management and tips and tricks that can help improve your finances. This article may be reprinted on your Web site if the copyright, author information and active link are included.


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