04/18/2011 12:13 pm ET Updated Jun 18, 2011

Check vs. Card

Two weeks ago, Consumers Union's report "Adding It All Up: How Prepaid Card Fees Compare to Checking Account Fees" found that prepaid cards often are more expensive than checking accounts.

A week before, a Bretton Woods Inc. report "Comparative Analysis of Reloadable Prepaid Cards to Basic Checking Accounts and Check-Cashing" concluded exactly the opposite: a lot of people switching from banks to prepaid card accounts due to high checking account fees.

So which is it?

The answer: what's needed here is a calculator, not another report. That's because your particular circumstances determine whether a traditional checking account or a prepaid card account is a better deal.

Here are some basic good-sense questions to ask when thinking about financial services options:

Do I live in a rural area with a good credit union?
Credit unions often offer free checking and good customer service. The not-for-profit charter of the Credit Union and its economic motivations often are the most favorable to you.

Do I carry high balances and am I constantly online?
Some banks still offer fee-free checking accounts if you carry a high balance ($1,500 average daily balance at Wells Fargo for instance) and conduct your banking online instead of at a teller.

Do I a carry a moderate balance and make frequent debit payments?
If so, a prepaid account with no transaction fees could be the best option, as long as you don't need to write lots of paper checks and don't need to see a teller.

Note that the transaction fee structure is important here. Some prepaid cards, including ones analyzed by Consumers Union, carry high fees, but others do not.

Am I managing a dependent's spending?
If you're managing a dependent's account, you'll want a separate account to help your dependent spend responsibly. A teen prepaid card account gives teens a card with build-in spending limits and no overdraft option. It gives parents the ability to transfer funds in, see the spending patterns and keep their accounts completely separate.

Do I prefer cash?
If you spend a lot of cash or go the ATM frequently, finding a local bank with free ATM access is probably your best bet, although many prepaid cards offer free cash-back at grocery stores and can be a good option if you don't want to pay checking account fees.

One other factor that gets cited a lot is FDIC insurance. Some columnists have made a point of saying that prepaid cards aren't insured by the FDIC, while bank checking accounts are. This is wrong. Prepaid cards are backed by issuing banks that provide FDIC pass-through insurance to the cardholders, even though they are not mandated to do so. And because prepaid card-issuing banks want their cardholders to be able to receive tax refunds and other federal benefits in their cards, they now offer the newly required consumer protections under Regulation E. So basically, this is a non-issue.

Other factors include additional services that you might like, including rewards programs,
Internet and mobile access to your money, budgeting tools, alerts and so on. As a consumer, you need to shop for the best value at the lowest price, as a function of your needs and preferences.

While reports like those published by Consumers Union and Bretton Woods are useful compilations of prices that are otherwise difficult to find, they paint only a partial picture in very broad strokes. So finding the best deal still requires considering your personal situation and decided what features and services are most important to you.