The tremendous cost of check cashing for American Workers (and how to avoid them)

The team at CurrenC SF has put together an excellent video about the benefits of direct deposits to alleviate the very high costs of check cashing for American workers.

Here it is:

This video Copyright CurrenC SF and the San Francisco Office of Financial Empowerment


Coming soon: DirectDeposit.Center  the place that delivers Direct Deposits to All.


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Bill Gates’ take on frictionless banking with cellphones for all

Bill Gates talks about access to banking for all on Bloomberg Television.
His take: the banking fees from the developed world are just too high for the “rest of the world”.

While pervasive low cost technology like cellphones is the obvious product solution, the business model needs to be different.

It is not as insurmountable as it sounds, because the costs of doing business are also different:

  • marketing can be significantly cheaper: no need to advertise on TV
  • risk is lower: smaller amounts are involved and there is a lot less credit (mostly deposits & payments)
  • regulations can be lighter: see how M-Pesa got local support from the government in Kenya

While this may be too much to ask from large banks from the western world to adapt to, local players can greatly optimize their services and reduce dramatically the number of un-banked in the world.

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In New York Times, Prepaid Fee Story Misses The Mark

Fees?In yesterday’s New York Times story Paid via Card, Workers Feel Sting of Fees, reporters Jessica-Sliver-Greenberg and Stephanie Clifford raise an important question but fail to answer it: are a significant number of employers forcing hourly workers to use expensive payroll cards?

The three key conditions here are “significant number,” “forcing” and “expensive”. If these conditions are true, this clearly is a front-page size problem. But I can’t find a single concrete example in the story of an employer that forces employees to use expensive payroll cards as an only option.

Instead, the story smears by implication all payroll prepaid cards by naming a couple of outlier fees. And it implicates major retailers like Taco Bell, Walgreens and Wal-Mart up high, only to emphasize later in the story that these companies offer their employees payroll cards as one choice out of several, not as an only option. The story also fails to examine whether these companies’ payroll cards have expensive fees for common uses. I am familiar with the Wal-Mart prepaid card programs. They are known in the industry as some of the most cost-effective accounts available to consumers.

The problem with a story like this is it sows mistrust without adding relevant information for the people who are most impacted: the underbanked.

What would be more helpful? For one, show an actual fee table for a card like the JP Morgan Chase payroll card so readers can see if it is expensive for the way they bank. Then compare those fees side by side with a more affordable prepaid program, a checking account and the cost of relying on check-cashing stores and money order services. Base everything on someone whose annual income is below $25,000 and whose average monthly account balance is below $500.

Also, explore alternatives. For instance, ATM fees are complicated because there are multiple networks involved in different ATMs. It’s unclear whether the charges are from the payroll card program or the ATM network. But most prepaid cards let consumers get cash back for free at the grocery store. People like Krystal McLemore in the Times story who like to get smaller amounts of cash out more frequently can avoid fees altogether by skipping the ATM and using the free cash back features.

For broader context, mention that groups like the Center for Financial Services Innovation (CFSI) have published a set of principles – the Compass Principles – and that consumers and employers may want look at and prioritize card programs that subscribe to these principles.

And perhaps point to the Consumer Financial Protection Bureau’s Project Catalyst program, which has a major initiative to research how the underbanked use features on the more advanced prepaid programs to do things like avoid high-interest payday loans.


I wouldn’t expect New York Times journalists to be experts in the payments industry or underbanked consumers. But if the story is about how employers are forcing employees to use expensive payroll cards, I would expect good reporting to uncover specific examples and additional reporting to provide high-quality data and context to put the problem in perspective. Finding a few people to say they’re upset and citing the general growth of prepaid cards as a proof of the problem’s scope just places all payroll programs under the same umbrella and paints them with a black brush.

The lack of specific examples, quality data and thoughtful context turns this into a “he said she said story” that no doubt gets people excited and drives clicks but that is more likely to confuse than help the impacted audience.

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Thinking inside the box.

Consumers would love to get a better handle on how much financial services cost. Schedules of fees can be maddeningly complicated, and are often difficult to find (or to read when printed in very small type).
I spent a couple of hours today looking for the tables of fees on a dozen of websites selling prepaid card services, and each site had its own way of listing their fees.
Not good.

Senator Charles Schumer of New York was at the initiative of a credit card disclosure law enacted in 1988, when he was a congressman, where all fees are grouped in a “Schumer box“. This has improved transparency quite a lot.
The Center for Financial Services Innovations is now preparing a similar “box” for prepaid cards. The final format of the box has not been published yet, as this is still work in progress.

Below is a sneak preview showing how we are “thinking inside the CFSI’s box” and preparing to follow their recommendations. This fee box is for our mainstream UPside card product.
Expect a few tweaks here and there as the model gets refined and finalized.

Prototype of the Fee Box for the UPside Visa Prepaid Card:

UPside Visa Prepaid Card
Summary of Fees
Fee Category Fee Type Amount Typical Use
Total cost of set up Card purchase Free 1/lifetime
Optional 2nd Card purchase Free 1/lifetime
Monthly feeif loading < $500/month $4.95 1/month
if loading > $500/month $0.99 1/month
if Premium status1 Free 1/month
Optional second card
if loading < $1000/month $1.99 1/month
if loading > $1000/month Free 1/month
Add money: Direct deposit Free 2/month
Cash using MoneyPak® $4.95 charged by store 2/month
From another UPside card Free 2/year (IOU’s)
From a debit or credit card $2.80 1/year (for emergencies)
Get cash: From ATM $1.952 2/month
Store Cash Back (up to $60) Free 2/month
Spend Money: Signature Free 6/month
PIN Free 8/month
Add minutes to cellphone Free 6/year
Paper check $2.00 1/month
if Premium status1 1st monthly check Free 1/month
When traveling abroad 2% on top of exchange rate 1/year
Information: Call Customer Service $2.00 3/year
if Premium status1 Free 3/year
Email / online / mobile Free 8/month
ATM Balance Inquiry $0.992 3/year
Incidents Decline at POS Free 1/month
Negative balance Free 2/year
Decline at ATM $2.00 3/year
Inactivity Free 1/year
Card replacement $9.95 ($15 if Fedex’ed) if lost
Closing account Free 1/lifetime
Reimbursing funds remaining on card Free if via online check 1/lifetime
$12 if done by live agent 1/lifetime
1Earn 15,000 UPgrade points to become Premium Member
Earn UPgrade points by:

  • Direct Deposit = 2000 UPgrade points per load (over $200) + 1 UPgrade point per $1
  • MoneyPak loads = 1 UPgrade point per $1
  • Credit/Debit Card loads = 1 UPgrade points per $1
2Fees charged by ATM network may apply
or call 866-845-6273

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2011 was the year of making it easier to save money for our customers

2011: a year of savingsAs this is my last posting of the year 2011 on the Banking Up blog, I realize that our prevailing customer theme and product trend for the year was all about one thing: saving money.

This has been a year when financial woes have dominated the macro-economic news at the level of entire countries and even continents. Of course, individual consumers have suffered greatly, with the number of people in financial distress hitting records unseen in several decades.
In this dire context, protecting people’s money should be everyone’s priority in the financial services industry. Regrettably, many large banks and financial institutions have been featured on the front pages of newspapers because they have continued to protect their own money at the detriment of their customers. No wonder 2011 has seen a flurry of regulations intended to stem financial misdeeds: the implementation of the Dodd-Frank Act, the Durbin amendment, the birth of the Consumer Financial Protection Bureau.

At Plastyc, we were unaffected by this regulatory turmoil. Instead, the main additions to our service in 2011 were:

  1. Allowing customers to reach a “Premium” level, similar to the frequent flyer status of certain airlines, where maintenance and support fees are waived, and where more cash back points are earned;
  2. Issuing a free discount card for prescription drugs valid at tens of thousands of pharmacies to all our account holders;
  3. Introducing a Rainy Day Reserve allowing people to save money automatically for emergencies or future purchases without having to open a separate savings account.

Here you have it: three different ways to save money. To be candid, our motivation and self-interest are to keep our customers longer. All three money-saving features foster a longer-term customer relationship, in a year when, for the first time, public campaigns were orchestrated to invite consumers to ditch their banks.

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