Prepaid reloadable debit card is a relatively new product that banks offer as an additional service to their traditional banking packages. The primary target for this product is a pretty large population – somewhere around 40 million people, who don’t have bank accounts for various reasons.

As you can imagine, those people spend close to $1.5 billion on money orders, paycheck cashing, and other types of financial instruments and fees. Therefore, many banks, like Citibank, are offering prepaid debit cards that do not require opening a regular checking account.

For example, Citibank prepaid Mastercard allows you to establish a direct deposit so your employer can transfer your wages directly to the card or you can receive any federal payment by wire transfer. You can also reload the card at retail locations.

From the merchant stand point, any prepaid credit card or gift card with a Visa or Mastercard logo works the same way as any regular Visa or Mastercard, meaning it is accepted without any restrictions. However, there are a lot of important differences between prepaid cards and regular credit cards.

And one of these is a debit overdraft fee. The problem is, when you have a regular credit card, your credit line usually is large enough to cover your small regular transactions. However, if you load $200 on your Visa debit, you’d better monitor your balance very closely.

That is what actually happened to my son with his first attempt at debit card usage. He had deposited his first McDonald’s pay check of about $170 into his account and made several small purchases with his brand new Visa debit card. Everything was fine until he had $50 left on the account. At that time, he made two purchases of under $5 each and those last two things cost him $50 in overdraft fees.

The problem is, when you use your card, the amount you spent is going through an authorization process that can take as long as a day to complete. While the authorization is in progress, you may see this money as available spending balance, but the opposite is true. As a result, it is very easy to overdraft your account to your bank’s delight.

Let me show you some information from the terms and conditions of the Citibank reloadable credit card:

• Initial Purchase Fee    $9.95
• Load Fee    Free
• Refused Fee    $30
• Retail Reload Fee    $3.95 - $5.95
• ATM Withdrawal Fee    $2.50
• Debit Overdraft Fee    $25
• Lost Card Fee    $10
• Cash Advance Fee    $4.00
• Car Liquidation Fee    $10

As you can see, if you add all those fees, it becomes obvious that it is way too high a price for the privilege of using your own money. Moreover, according to the terms and conditions at green dot website you may be liable for as much as $500 in case you become a victim of an unauthorized transaction. This is pretty much discriminatory treatment compared to regular credit card customers.

I understand your situation may be different, but I’d rather use a regular checking account debit card or even a Paypal account and avoid all those fees and hassles.

The Citibank reloadable debit card seems to be pretty popular on the market, however for some reason it is not available online at this time. You can still contact customer service at 1-800-619-0901 to purchase the card.