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[Excerpt from story] Prepaid debit cards are billed as a better way to manage your money, a smart alternative to checking accounts. [...] Consumer advocates agree: Some prepaid cards can be a convenient and cost-effective financial tool. But they point out; some of these cards still have all sorts of “gotcha” fees to watch out for. Some have an activation fee of as much as $15. There can also be an inactivity fee, a declined transaction fee and a charge to contact customer service.
[...but prepaid] debit cards are different from credit cards or even debit cards tied to a checking account. They may not provide the same level of protection again loss or fraud. Ed Mierzwinski, director of consumer programs at U.S. PIRG, doesn’t think most people understand the difference.
“You need to realize that a prepaid card is just like cash. You could lose all of the money on the card,” he said. “And you don’t have a lot of rights, if any at all, when you have problems with the card.” [...]
[See "The Campus Debit Card Trap," a 2012 PIRG report, for more information about the perils of prepaid cards. Appendix II compares credit, debt and prepaid card protections.]
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