Russell Simmons Lowers Prepaid Debit Card Fees

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Paying for access to your own money might not sound like a popular concept, but the growth of the prepaid debit card market seems to prove this assumption wrong.

Prepaid cards function essentially as debit cards. For a monthly fee users can load cards up with cash and make purchases at stores or withdraw funds at ATMs. Unlike debit or credit cards, prepaid card use won't help you build up a credit score.

Competition in the prepaid space is heating up. Just last month personal finance guru Suze Orman charged into the prepaid world and caught flack by introducing her own card with a fee of $3.

On Monday hip hop mogul Russell Simmons announced a lower fee on hisRushCard. The fee drops to $7.95 from $9.95--for customers who opt to direct-deposit their paychecks the fee falls to $5.95. Card-to-card fund transfers between cardholders will cost $0.99, down from $2.95.

"While some traditional banks are raising monthly minimums and fees, RushCard, with the doubling of our monthly new customer acquisitions, continues innovating toward our mission of empowering Cardholders to achieve their financial well-being, with products and services that are compelling alternatives to banks and check-cashing firms," Simmons said in statement.

Prepaid debit cards are attractive to the "unbanked," or the 7.7 percent of American households that do not have a checking or savings account, many of which are deterred by overdraft fees and other charges associated with traditional bank accounts.

But a cautionary study from NerdWallet warns users that the average card can cost up to $300 per year. Many smaller banks offer free checking accounts that are an often cheaper alternative to prepaid debit cards.

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Filed by Emily Cohn