How Netspend works and makes money (TSS)

NetSpend, a company with prepaid debit cards, claims that it offers a competitive alternative to checking account debit cards, credit cards, and cash. Customers provide the company with their name and address, and the company will mail them a personalized card, and they will activate and recharge their funds. The company claims that its cards provide advantages for consumers who do not have bank accounts, credit cards, or access to traditional financial services.

What is NetSpend?

Headquartered in Austin, Texas, NetSpend is a wholly-owned subsidiary of Total System Services Inc. (NYSE: TSS). The company operates a network of 70,000 distribution centers and 130,000 recharge points, where consumers can purchase NetSpend cards and recharge with cash. These locations include retailers, check cashing locations, convenience stores, grocery stores, pharmacies, insurance companies, and tax filing companies. NetSpend also provides a payroll card solution that allows employers to directly deposit their salary into the employee’s card account.

How does NetSpend work?

NetSpend provides Visa and MasterCard prepaid cards to its customers. State and federally regulated financial institutions work with NetSpend to issue these cards, which are underwritten by the Federal Deposit Insurance Corporation (FDIC). These cards allow consumers to add, spend, withdraw and manage funds. Customers can use features such as personal-to-personal bank transfers, direct deposits from employer or government checks, text alerts, reward plans, budget tools, and tiered interest rate savings account options.

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How does NetSpend make money?

NetSpend offers three service plans for its customers. Pay-as-you-go plans are designed for customers who want a limited number of transactions. With this plan, there is no fee to open an account, and no plan fee. Every time a customer chooses a credit card and makes a purchase at a retailer, he needs to pay 1 USD, and every time he chooses a debit card, enters a personal identification number (PIN), and makes a purchase, he needs to pay 2 USD. Under the company’s FeeAdvantage plan, customers do not need to pay for opening an account, but they need to pay a monthly plan fee of US$9.95. The program allows unlimited purchases at retailers using debit or credit card options. The Premier FeeAdvantage plan has no account fees and unlimited debit or credit card purchases, but the customer pays a monthly plan fee of $5. However, to be eligible for this program, customers must deposit a total of $500 in payroll or government benefit direct deposits within the calendar month.

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NetSpend also charges US$2.50 for each domestic automatic teller machine (ATM) withdrawal and US$4.95 for each international ATM withdrawal. The company refuses to charge $1 for each ATM transaction. The company does not charge any fees for direct deposits and online account-to-account transfers, but it charges $4.95 for account-to-account transfers made by customer service agents. NetSpend charges retail card loading fees that vary by location and may charge mobile check loading fees. The company may charge fees for certain types of external bank transfers.

NetSpend does not charge any fees for online balance inquiries, but may charge 50 cents per inquiry for telephone requests. The company also charges fees for check requests, additional statements, additional card issuance, card replacement and expedited card delivery. NetSpend evaluates the cost of rejecting ACH debit transactions and stopping payment requests. Customers who require customized cards will have to pay a fee of $4.95 per card. The company charges maintenance fees for dormant accounts.

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What do customers think?

NetSpend gets a high overall customer service score from its users. As of August 2016, ConsumerAffairs.com had 3,149 comments on the company’s products and services. Among the 1,023 reviewers who rated NetSpend, 713 gave the company a four- or five-star rating, 46 gave it a three-star rating, and 42 gave a company with two stars and 222 stars a one-star rating. Many positive reviewers mentioned ease of activation and excellent customer service, while some negative reviews mentioned poor customer service.

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