Prepaid Cards Are Only Loaded With Problems

Thinking of ditching your debit card for a prepaid swipe card? Don’t.

There’s no doubt that U.S. banking needs a revolution. Forums and social media are filled with complaints against nearly every bank you’ve heard of, and a report revealed that in 2015, the top three big banks — JP Morgan Chase, Wells Fargo, and Bank of America — made over $5.1B from overdraft fees alone.

Admittedly, these numbers are atrocious, and there’s a good reason that the top political candidates are making the fees these banks charge part of their platform. These fees — amongst many of the dozens of others banks hide — are reasons that many Millennials are choosing alternative methods to manage their money. Either our generation has been screwed over one too many times, or by being screwed over by these fees many of us have been punished to the point of being banned by most of the mainstream banks via screening tools like Chexsystems.

Now, according to a report from Global Cash Card and The Center for Generational Kinetics, 5 million Millennials don’t have a checking account and a third of Millennials — over 29 million workers — said that they found the concept of a paycard valuable.

But should Millennials really be choosing paycards instead of depositing their paycheck into a real bank? I decided to run an experiment: I ditched one of the Big Banks to try the paycard method of managing my finances.

My finances are complicated, but no more than any other Millennial’s; I receive personal checks for some of my freelance work, direct deposit from AOL once a week, and my husband and I transfer money at least once a day. (We share finances, but maintain our own bank accounts.) My last bank had a gorgeous way of tracking spending habits, so I also needed my paycard to connect with Mint. I wasn’t asking for too much, right?

My husband had prior experience with the Green Dot prepaid Visa card, so when it came time to run the experiment, that’s what I chose. I did my homework, and Green Dot seemed to be a viable bank replacement option. My biggest concern — especially after the uproar about how banks like Bank of America process and post transactions — was how transactions would post; would they come through in the order they were made, or would Green Dot hold the larger transactions until the end in the hopes of getting me to “accidentally” overdraft?

I grabbed my own Green Dot card from a drug store, deposited a few dollars, and watched the transactions immediately appear in the app. Problem solved.

However, new problems also immediately appeared. When I registered the card, it refused to validate my address with my apartment number, and so my permanent card — which would not ship for five days — is being sent into the ether (or, my best guess, the leasing office). This complaint is incredibly common for Green Dot.

Since I was no longer using a Big Bank credit or debit card, I was also banking on Green Dot’s guarantee that the card could be used “anywhere Mastercard and Visa” can be used.

Before I even left for my business trip this week, I ran into hurdles where the card was declined. I blamed this on the address validation issues, and then my husband pointed to a possible issue I’d have with Uber he had read about online. True enough, as soon as I landed in San Jose, I was forced to take a taxi to my hotel. Uber insisted my Green Dot card was invalid when I requested a ride.

The lowest blow came when I checked into my hotel (paid for in advance thanks to my boss). I needed a credit card for incidentals—but they didn’t accept Green Dot, either.

Because my husband and I were both living off the financial grid at this point, there was no way to pay for the restaurant or room service. Neither one of us use credit cards. There was no other bank card.

My only option, only three days into this experiment, was to call my dad and ask him to phone in his debit card number to the hotel and into the Uber app so I could get to the corporate office the next day.

That next morning, I opened a Bank Of America account, setting up my paycheck to be safely deposited into a bank backed by the FDIC, a bank which has strict fraud protections and the immediate ability to access deposited cash once an account is opened. (Its temporary card is also accepted by Uber, interestingly enough.)

This is not to say I didn’t have other choices than a Big Bank; I could have gone with Simple, an — ahem — simple debit card with neat features to manage money, and also backed by a national big bank (Bancorp), but is a pain to deal with if you move and lacks anything other than just a debit card. (In reality, it’s just a prepaid debit card backed by a “real” bank.)

Ally was another anti-brick-and-mortar option, though its customer service notoriously sucks, especially if you travel or dare try to change your last name when you get married (as I’m finally in the process of doing).

There are, of course, also credit unions. Those can be great for their great rates and lack of fees, but — to point to my experience needing a bank account while traveling for business — can also be a terrible option if you need help and aren’t in your hometown.

I can understand that Millennials choose options other than a checking account “mainly due to a distrust in banks.” There are undoubtedly many reasons to distrust banks in general, but avoiding banks altogether might not be the smartest choice for this demographic.

It’s an especially difficult choice as more than half of Millennials are using ride-sharing apps like Uber — which don’t accept prepaid cards. If a third of Millennials opt for prepaid cards, how will they get to the airport, to their job interviews, or even home after work?

I ended my experiment by reaching out to Green Dot customer service. The CSR confirmed that merchants can choose not to accept Green Dot, despite the statement on Green Dot’s packaging that the card is accepted “everywhere” MasterCard and Visa are accepted.

Because Green Dot is based internationally, the funds are not even regulated or guaranteed to be available to either merchants or customers—and the U.S. doesn’t have to do anything about that.

But Millennials can. They can opt to not ditch their debit cards yet, and instead, find a smarter way to manage their money. A way that won’t leave them hungry. Stranded at the airport.

Or, as we’re so typically stereotyped — asking our parents for help.

Kelly Clay is a Seattle-based freelance writer obsessed with coffee, sunshine, and Oxford commas.

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