The lowdown on Wal-Mart's debit card

By Lucy Lazarony

Is Wal-Mart's new low-fee, prepaid debit card a good deal?

It can be.

For those who lack the good credit history needed for a credit card, prepaid debit cards can make a lot of sense. Spending is limited to the amount the user has loaded onto the card.

Although they can be used like a regular Visa or MasterCard -- to pay for gasoline at the pump or to shop at a store or on the Web, for example -- every transaction is backed up by money in the bank, so there's no mounting debt. Unlike a secured credit card, there is no credit check or employment verification.

For those without a bank account or who have been slammed by big checking fees and penalties, prepaid cards allow users to pay bills online and use direct deposit, yet there's no chance of an overdraft. You add value to the card via direct deposit, cashing a check or by loading cold, hard cash.

Plus, the prepaid cards' Visa or MasterCard branding offers fraud protection and near-universal acceptance that a money order or cash can't match.

Yet the cards can be a minefield.

Most prepaid cards charge fees for every PIN-based debit-card purchase, for balance inquiries, for online bill payments and even for declined transactions. Almost all will charge an activation fee and a monthly maintenance fee.

Card marketing has grown more sophisticated, with some prepaid cards purporting to report to credit bureaus, some offering "rewards" points and others now warning that overdrafts, though theoretically impossible, will be met with a $29 spanking.

Is Wal-Mart any better?

Wal-Mart's MoneyCard offers fees a bit lower than the norm and a shot at avoiding many of them altogether if the user is careful. (You can compare Wal-Mart's fees with others' through CreditCards.com.)

"If you're a regular user of the card, there are ways to use it that fees are minimal to nonexistent," says Jennifer Tescher, the director of the Center for Financial Services Innovation, which researches ways to reach the unbanked for the financial-services industry.

Wal-Mart charges an activation fee of $8.94, a monthly maintenance fee of $4.94 and a reload fee of $4.64. But if the user reloads the card via direct deposit, the reload fee is waived. If reloads reach $1,000 during a month, the maintenance fee is waived.

Using an ATM is costly: You'll be charged a $1.95 transaction fee each time you withdraw cash from the card at an ATM and 75 cents each time you check your balance. But either is free at the store's cash registers (and there are more than 6,000 stores).

Continued: Careful what you wish for

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