Trying to find the catch in this offer

**PaydayLoner** · 03-02-2010, 06:07 PM

Originally posted by disneysteve View Post

As I mentioned in another thread, I have a NetSpend prepaid Visa card (netspend.com). I use the card for some online transactions when I don't want to give my regular credit card info. One of the other services NetSpend offers is an online savings account that is currently paying 5% interest.

There are some catches, like the only way to fund the account is by transferring money from the card balance. That means I have to first fund the card, which I can do from my checking account or PayPal account, and then transfer that to the savings account. That is no big deal. Withdrawing money works the same way - transfer to the card and either spend it from the card or withdraw it at an ATM. There is no minimum balance and no fees and the account is FDIC-insured.

I looked around a little on the site and the only thing I can see is this little warning: "Fees could reduce the earnings on the account." The site does say the rate is a promotional one effective as of 2008, but that makes me think they're not planning to lower the rate anytime soon, if it's been in effect that long.

As far as fees, looks like there's either a monthly fee or transaction fee for using the card, but if you're already paying the monthly fee for unlimited transactions of course it wouldn't be any extra. In my state, I could only find places to reload that charged $2-$4.50 on the website, but I didn't see Paypal listed so couldn't see what their fee is.

A flat fee of $4.50 to load the card would mean that if you were depositing $90 at a time onto the card and then into the savings account, you'd earn no interest from the savings the first year. Couldn't find what the fee would be to reload the card from the savings account, which could reduce the interest more.

So the main catches that I could see would be the fees to add money, remove money, or if there are any to maintain the savings account. And also you'd need to make sure you could put in as much as you wanted to, and also take out as much as you'd want to. It says maximum loads vary per person, but you wouldn't want to be in a position where you could add small amounts to save up for something but then be unable to withdraw the large amount to spend on whatever you'd been saving up for.

I expect that from the bank's point of view, they're obviously making a profit on this from their "average" customer's fees. So the way to profit from it would be to carefully figure out how to minimize the fees while still having the access you need to the money, and be one of the "above average" customers who earned more than they paid in fees.

Dunno, that's just my 2 cents worth from looking at the site.

**creditcardfree** · 03-02-2010, 07:02 PM

Ditto. That's a good run down of what I saw as well. I would try to call customer service to confirm the rate since it has been in effect since '08. Something about it just seems to good to be true, but those fees are pretty high were they could offset paying high interest for those who take advantage of the offer. I looked up places where I could get a card in my area, and many of them were gas stations and payday loan companies. Hmm..

**disneysteve** · 03-02-2010, 07:31 PM

Originally posted by creditcardfree View Post

I looked up places where I could get a card in my area, and many of them were gas stations and payday loan companies. Hmm..

That's true. This card is designed for folks who don't have a bank account or bank relationship. That said, as with many things, those of us who are a little more financially savvy can sometimes use things like that to our advantage and game the system somewhat. I'm trying to figure out if there is some big red flag that would make this savings account essentially worthless. Some significant fees to deposit or withdraw money would certainly qualify as would a monthly account maintenance fee. I'll have to log in tomorrow and really read all of the fine print. If $90 is the threshold of breaking even, for example, what if I could make a one-time deposit of $5,000 or $10,000? Then a $4.50 fee becomes insignificant against a 5% interest rate.

Since I think I'm the only one here with a NetSpend account, I'll post whatever I learn.

**ken1706** · 03-03-2010, 12:50 PM

Please keep us updated on how the NetSpend account goes.

This reminds me of a secured credit card program that Citi has been offering. It requires that you open a CD with the secured credit card. The CD rate is 4% with an 18-mo term which is a very high rate these days. There are some fees on the credit card and the CD has a maximum deposit amount of $5K (used to be $25K). It's really intended for those with bad credit, but it can also be opened by the financially savvy.

Trying to find the catch in this offer