Pew: Prepaid debit cards a sensible choice for some

You can buy them online or at the store, add money whenever you want, use them at most stores and withdraw cash from any ATM.

They're like a bank debit card without a checking account attached, although some prepaid cards now offer savings accounts and online bill pay. Which raises the question: are these cards a smart alternative to a checking account?

That's what the folks at the Pew Charitable Trust wanted to know. And a report released Wednesday afternoon says for some people - those who pay costly overdraft fees - prepaid debit cards could be significantly cheaper.

Pew researchers looked at 52 general purpose reloadable prepaid cards. Most are branded with the American Express, Discover, MasterCard or Visa logos, which means they can be used anywhere debit or credit cards with that logo are accepted.

It's no secret, prepaid cards have a lot of service fees. The most common: card acquisition, monthly maintenance, ATM withdrawal, point-of-sale transactions and customer service calls.

Most fees are less than $3. Even so, they can really add up. And some are significantly higher. The median monthly service fee for the cards in the study is $5.95; the median acquisition fee is $9.95.

While prepaid debit cards might cost less than a checking account for someone who keeps getting dinged with overdraft fees, Pew says they come with significant risks:

- Comparison shopping can be a challenge: Checking accounts have a fairly uniform fee structure. Prepaid cards do not. And there are no clear and uniform disclosure requirements. Pew says this makes it very difficult for people to find the best card for them.

- They're not as safe as a checking account: Some prepaid debit cards promise to limit your loss from theft or other unauthorized use. With a bank debit card that fraud protection is guaranteed by federal regulation.

Clearly, prepaid debit cards can be a useful financial tool for some people, especially those who do not have or want a bank account.

They can also be a way for parents to give their kids money without giving them cash or access to their bank account.

The bottom line: Pew says if you have a checking account and you don't pay overdraft penalty fees, that checking account is still probably your best deal. If you decide to get a prepaid card, check to make sure you understand all of the fees.