William Smith relies on prepaid debit cards as he travels the country tattooing musicians in vans, trailers, hotel rooms and houses. The 32-year-old Ocala, Fla., tattooer (see photo) says he has no bank account, just a low-cost MoneyCard obtained from Wal-Mart Stores Inc.

“You know the few bills that I have come out of there. I pay my rent in cash, but other than that everything [that] can be done automatically is through that [card],” says Smith. “I don’t have a bank account. I get paid in cash.”

Prepaid card companies are pushing much harder to win the business of cardholders like Smith by driving down their fees.

This month, for example, nFinanSe Inc. launched a prepaid card with a $3 activation fee and a $2.95 monthly fee, a fee structure similar to Green Dot Corp.’s Wal-Mart MoneyCard. And SmartyPig LLC, which provides an online consumer-savings service, also is releasing a prepaid card whose only fees are its initial $4.95 cost and a $1.95 fee for using out-of-network ATMs.

In being marketed for their relatively low fees, these cards stand in sharp contrast to recent entrants such as the ill-fated Kardashian Kard, which was criticized in the media for charging up to a year’s worth of fees up front (see story). http://www.paymentssource.com/news/outcry-fee-kardashian-kard-kaput-3004149-1.html

“[The] prepaid card industry has suffered an image problem in the past from high and sometimes opaque fees,” Zilvinas Bareisis, a senior analyst at Celent, said in an e-mail. “There has been a general trend towards lower and clear fees.”

The low-fee play is more than just a competitive move, though, analysts say.

Impending debit card interchange regulation could bode well for those in the prepaid business. Some industry watchers say the change, which the Federal Reserve Board says it will announce on Dec. 16, inevitably will force retail-banking companies to raise fees for consumers. Such changes could make prepaid cards more attractive by comparison.

“There is an opportunity here for alternative payment providers,” says Gwenn Bézard, co-founder and research director at Aite Group, managing the firm’s banking and payments practice. “It’s definitely an opportunity for them to compete with banks.”

Fees have been in the spotlight since the Kardashian Kard, endorsed by reality television’s Kardashian sisters, was pulled from the market just three weeks after its introduction.

The cost of activating the card was $59.95 or $99.95, depending on how many months of fees the customer wished to pay in advance. But the card’s $7.95 monthly rate was in line with what typical prepaid cards charge. The business model behind the card was an apparent attempt to lock consumers in over time.

“We all got a good laugh out of that,” Jerry R. Welch, chairman of nFinanSe, says of the Kardashian product. “It’s hard to believe the consumer was going to pay that kind of price to buy a card. It was almost not even serious.”

Indeed, there are clear benefits to choosing a prepaid card instead of a checking account at a bank, notes Smith, who goes by the moniker Shauncey Fury and has tattooed members of popular bands he follows on concert tours.

“I would just get killed on overdraft fees, it would be ridiculous, Not only did I not have enough money for what I wanted to buy, but I owe [the bank] money,” he says.

Still, Smith says he prefers a card to carrying cash for the sense of security it provides. On one concert tour, “I would have like thousands of dollars in my wallet. That’s not a good scenario; … people get tempted.”

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