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Updated on Thursday, September 29, 2016
If you’re in a position where you don’t have access to traditional banking, you may consider getting a prepaid card to manage your finances. It’s important to go into this decision with your eyes wide open: prepaid cards typically come with onerous fees that can eat into your already strained cash reserves.
Traditional checking accounts are almost always a better financial choice. But if you are unable to qualify for a bank account due to a poor banking history, you may not have that option. In that case, prepaid debit cards can be a helpful tool. Just be sure you’re aware of the fees before signing up.
We have already reviewed the RushCard. Today, we’ll look at NetSpend, another large prepaid debit card issuer in the U.S. We’ll walk you through how it works, what fees to look out for, and how to avoid those fees when possible.
Everything You Need to Know about NetSpend
NetSpend comes with three tiers of membership. The lowest is Pay-As-You-Go and comes with no monthly fee. You will be automatically put on this plan unless you call NetSpend to request an upgrade to their FeeAdvantage Plan.
This second plan tier, the FeeAdvantage Plan, comes with a $9.95 monthly fee. But the plan allows you to dodge other transactional fees that you would incur under the Pay-As-You-Go Plan.
The third tier, Premier FeeAdvantage Plan, requires larger direct deposit commitments. If you are enrolled in the second-tier FeeAdvantage Plan and have a direct deposit of $500 per month, you will be automatically upgraded to the NetSpend Premier FeeAdvantage Plan. This plan lowers transactional fees even further and only costs $5 per month. If you are at the first-tier Pay-As-You-Go level, you will have to call to request to be moved to the Premier tier when your direct deposit reaches $500 per month.
Here’s what it will cost you to do business under each of these tiers:
Direct deposit fees
There is no fee for direct deposit under any of the three plans. This is one of the best ways to load money onto your card.
Depositing and withdrawing funds
You can deposit and withdraw money at select NetSpend Reload Network locations. Fees vary by location, so if more than one reload location is accessible to you, it’s best to shop around. While all locations allow you to deposit money, not all of them will allow you to withdraw.
You can also withdraw money from financial institutions. If it is a Visa member financial institution, you will only have to pay a $2.50 fee for this service. If it is not, you will have to pay the $2.50 plus any fees the financial institution charges.
Loading funds onto the card
It’s easy to deposit checks through your NetSpend mobile app, but it will cost you. This process is managed by a service called Ingo Money, which carries heavy fees. If you are depositing a check that has a pre-printed signature, like a payroll check, you will pay the greater of $5 or 1% of the check’s value. If you are depositing any other check, you will pay the greater of $5 or 4% of the check’s value.
The only way to waive these fees is to agree to a longer processing time, by which you’ll receive your funds after 10 days.
You can add money onto your card via PayPal with zero fees.
When you deposit money, the most you can load via cash at any given time is $7,500 per day. The maximum you can load in a 30-day period is $15,000. Fifteen thousand dollars is also the maximum you can have on your card at any given time, though exceptions are sometimes made if your direct deposit makes it difficult to stick to that ceiling.
When you withdraw money from an ATM in the U.S., you’ll incur a $2.50 fee in addition to any fees the ATM operator charges.
All foreign transactions are charged a 3.5% fee per transaction. If you’re withdrawing money from an ATM outside of the U.S, you’ll be charged $4.95 instead of $2.50. If your transaction is denied, you’ll be charged $1, whether you’re at home or abroad.
This fee applies to people using the first-tier Pay-As-You-Go Plan.
If you make a debit purchase with your NetSpend card, you will pay a $2 fee for each transaction. If you use it as credit, your fee will only be $1. If you have a FeeAdvantage Plan or NetSpend Premier FeeAdvantage Plan, these fees are waived.
You may end up paying a fee when you want to check your balance. If you check online, via text or email, there aren’t any fees aside from any that your cell provider may have for the text. When you check your balance at an ATM or over the phone, however, you will have to pay a $0.50 fee each time.
The fee for checking over the phone is waived if you’re a NetSpend Premier FeeAdvantage member. You will still have to pay when using a live customer service representative or an ATM.
Your best option is to transfer funds between two NetSpend accounts through the website, which is free. Avoid calling customer service for help with transfers at all cost. If you call and complete the transfer with help from a NetSpend customer service representative, NetSpend will charge $4.95 per transfer.
You can also transfer money onto your NetSpend card from another financial institution. NetSpend does not charge a fee for this, but your financial institution might. Check before making any transfers.
It’s free to pay bills with your NetSpend prepaid debit card as long as you choose to use one of the no-cost, third-party service providers available in your online Account Center.
But if your payment is denied, you will be charged a $1 fee. Furthermore, if you decide to stop using ACH payments from your NetSpend card to pay bills, NetSpend will charge you a $10 cancellation fee for each bill.
Adding a new user
Sharing a NetSpend account with someone else will cost you. If you want to order a secondary card for an additional user, you will have to pay $9.95. If either of you needs to have your card replaced, you will be charged an additional $9.95 per card.
Standard shipping for replacement cards takes 7-10 days and is free. But if you need your card in a hurry, you can pay $20 to have it delivered in 3 business days or $25 to get it in 1-2 business days.
If your account has been inactive for 90+ days, you will be charged a $5.95 account maintenance fee every month.
NetSpend has a cashback reward program setup that works with rotating merchants. When you use your card to shop with a featured merchant, you can earn cash back. You must register for each individual merchant offer in order to take advantage of this program.
If you refer a friend, NetSpend will give both of you $20 each after your friend has loaded $40 onto their card.
On top of offering budgeting tools, NetSpend also offers an FDIC-insured high-yield savings account. If your balance is $1,000 or less, you can currently earn a variable 5% APY. This is extremely high, although it’s worth reiterating that the rate is variable. Balances above $1,000 only earn 0.50% APY.
How to Set Up Your Card
You can open an account online, providing your name, address, and date of birth. NetSpend can also ask to see your driver’s license or another form of ID, so be sure to have these ready along with a way to upload photos of each. If you want to add a second cardholder to your account, you will need this information for them as well.
After you have successfully applied, you will need to activate and register your card before using it. To activate it, you’ll either need to call in or log in online. Then, they’ll ask you to verify your personal information in order to register.
You will be able to use your card anywhere Visa is accepted and to transfer money to other NetSpend members.
The Fine Print
While we’ve covered the fees, there is some more information you should know before opening an account with NetSpend.
With NetSpend, you can potentially get your paycheck a full two days before payday. When this works, it’s because your employer sent the information to NetSpend early and has approved the action. If your employer does not send your pay information early or does not approve of early distribution of funds, you will not be able to take advantage of this perk.
Maximum Transaction and Balance Limits
One-time ATM withdrawals are capped at $325. You can make up to six ATM withdrawals per day, with a total cap of $940. There may be even stricter limits imposed by the ATM owner.
If you are withdrawing money from a financial institution or NetSpend Reload Network location, the maximum you can withdraw is $5,000. This same limit applies to purchases.
There are some situations where a merchant will request to hold funds. For instance, if you pay at the pump at the gas station, they can hold up to $100 until your final purchase goes through. If you are staying at a hotel or getting a rental car, the business may place a hold on your card up to 20% higher than the actual purchase price to account for any extra tips or damage charges you could potentially incur. This hold can last up to 30 days, meaning you won’t have access to that money until the hold is up.
While the interest rate on NetSpend’s savings account is impressive, the fees on its prepaid card are numerous. Here are ways to avoid some of those fees:
- Fees for reloading your card in person. Whether you go to a financial institution or a NetSpend Reload Network location, you’re going to incur fees. You can avoid these by staying as digital as possible, loading your card instead via direct deposit or PayPal.
- Fees for mobile deposit of checks. The fees imposed by Ingo Money can eat away at your paycheck quickly. If at all possible, set up direct deposit so you don’t have to mess with paper checks, or be sure you can wait a full 10 days before having access to those funds.
- Fees for transferring money between accounts. If you choose to transfer money to another NetSpend user via a customer service representative, you will incur a $4.95 fee. Avoid this fee by doing the transfer online.
- ATM fees. NetSpend suggests avoiding ATM fees by asking for cash back when you’re making a purchase at a retailer. If this is possible for you, it could save you some money.
- POS fees. When you make a point-of-sale purchase, you will be charged $1 to run the purchase as credit or $2 to run it as debit if you are on the Pay-As-You-Go Plan. This is not ideal, but upgrading to a plan where these fees are waived will cost you either $5 or $9.95 per month. Most people will make enough individual purchases to make upgrading worth it, but run your own numbers before making the switch.
- Balance inquiry fees. To avoid these fees, make a habit of checking your balance exclusively online.
- Foreign transaction fees. You can avoid these fees by only using your card domestically.
- ACH fees. Unfortunately, making automatic bill payments with your NetSpend card will eventually cost you money if you ever have to stop the automatic payment. You’ll have to pay $10, but you can avoid this fee by manually paying all of your bills.
- Fee for account inactivity. If you want to avoid a $5.95 fee, don’t let your account stay inactive for 90+ days.
Pros & Cons
Pro: NetSpend’s savings account has an incredibly high interest rate of 5% APY.
Con: That 5% APY rate only applies to a balance of up to $1,000, which is likely not even enough for a sufficient emergency fund. After that, rates drop to a modest 0.50% APY.
Pro: You can earn money for referring friends.
Con: You’ll be referring them to a prepaid card laden with fees. NetSpend is not alone; most prepaid cards come with a lengthy fee schedule. It may be more considerate to recommend a traditional checking account to your friend if they can get one.
Pro: Unlike many prepaid cards, NetSpend has a rewards program that can equate to cash back.
Con: You are rewarded for shopping with certain merchants, so you won’t earn cash back on every purchase. If this is your goal, there are plenty of credit cards that offer rewards regardless of what you’re purchasing where.
Pro: The maximum balance limit of $15,000 is decently high in the world of prepaid cards.
Con: This may not be the best card for big purchases, especially if you’re north of the $5,000 mark.
When to Transition Away from Prepaid Cards
While the 5% APY interest rate on NetSpend’s savings account is advantageous, the advantage only lasts until you hit the $1,000 mark. At most, you can earn $5 per month this way, and with all of its fees, NetSpend could potentially cost you more than your savings account would be earning.
If you can get a traditional checking account with low or no fees, it is likely to be better for you financially. That being said, there are a couple of reasons you may not be able to access one.
The first is if you have a poor banking history. If this is the case, don’t give up. Negative hits on your ChexSystems report, the reporting agency for checking a savings account, last a maximum of seven years, though most items are dropped after five. Use those years to demonstrate good behavior so that when the negative information falls off of your report, you’ll be ready for your traditional checking account.
If you don’t have access to a physical bank, consider online banking. You can easily have a traditional checking account in this way, and you’re not as likely to run into fees for things like depositing a check via mobile.
If you don’t have access to the internet via a computer or smartphone, check out the ConnectHome program. It provides internet and technology like computers at low or even zero cost. It’s not fully mature yet, so it may or may not be available in your area, but it’s something to keep tabs on. Check back frequently to see if they’ve expanded to your locale.
While you’re waiting, you’ll unfortunately have to look at less-than-desirable options, like prepaid cards. If you’re going that route anyway, though, you might as well earn 5% APY on your savings.