For most people, money and libraries only mix when it comes to paying fines for overdue books. But one day, you may be able to stop by the circulation desk to reload a debit card.
Institutions in three states offer library cards that double as prepaid Visa debit cards, under a program started last summer by SirsiDynix, a Lehi, Utah-based software company. Participating libraries get a portion of the fees paid for the service, while patrons get a less expensive alternative to opening a checking account, if they don’t have one.
As a library service, the cards may be a boon to people who don’t know that prepaid debit cards are even an option for storing money and paying for merchandise without a bank account. Reloadable prepaid cards are most popular among younger Americans, who are also less likely than older consumers to have bank accounts, says the Federal Deposit Insurance Corp., a U.S. bank regulator.
“Given their multiple functions, financial services cards are often marketed as an alternative to a traditional checking account and are frequently targeted to the unbanked or underbanked, students, and recent immigrants,” the agency said about reloadable prepaid debit cards in a 2009 report.
Unbanked and underbanked
Last year, 7.7% of American households were unbanked, or didn’t have a bank account, the FDIC says. Another 20% were underbanked, meaning they had an account but also used alternative financial services such as prepaid cards.
Libraries in poorer communities are more likely to serve unbanked or underbanked patrons. Kelli Staley, a library department manager in Lansing, Illinois, says she heard about the SirsiDynix program at a professional meeting. Most of those there worked at libraries in wealthier cities, and they weren’t interested in it. But Staley says it excited her because some people in Lansing don’t have access to banking services.
Staley anticipates the program, called I Love My Library Card by SirsiDynix, will help those who lack bank accounts gain access to modern financial services and convenience, such as the ability to have funds directly deposited to their cards. That way they can avoid check-cashing stores, where fees vary widely but tend to be costly. For example, 7-Eleven stores charge 0.99% of the check amount, while at Wal-Mart-Stores it costs $3 for sums under $1,000. Avoiding such expenses may help offset the price of using a prepaid card from the library.
In addition to a one-time enrollment fee of $5.95, users pay a $5.95 monthly service charge. That’s higher than the monthly cost for the best prepaid debit cards chosen by NerdWallet, which ranges from zero to $5. Using the library debit card in an automated teller machine costs $2.50, and there’s a $1.95 charge for using a personal identification number (PIN) in a transaction. While adding money to the card and direct deposits of paychecks, tax returns or government benefits are free, merchant fees may apply to loading cash onto the card at a gas station or a store.
Some prepaid debit cards issued by banks or other companies that appear to have lower monthly fees actually come with hidden charges like making you pay to speak to a customer service representative, says Justin Swain, a spokesman at SirsiDynix, which makes library software. “Really, what it comes down to is transparency on the fees,” he says.
Responding to consumer and regulatory concerns, the U.S. Consumer Financial Protection Bureau hasproposed new rules governing fee disclosure, fund safety and other aspects of the increasingly popular cards and other prepaid debit accounts.
Ideally, library staff members would help patrons research debit card options to find the best mix of fees and services, rather than promoting one that pays the institution for acquiring new users. There’s no question a savvy shopper could find a prepaid debit card with lower fees than this one.
Staley expects some interest from patrons who have bank accounts but see other value in prepaid cards, such as information security.
“I’ve been trying to promote the fact that you can put on a certain amount of money and it’s safer in the event of a data breach,” Staley says. The cards may also appeal to people who see them as a way to help their library financially. Separately, the card offer may provide a way to stay relevant and attract young people to the library.
So far, Staley’s institution has issued 216 cards, but only 15 have been activated by their holders. Libraries in Maryland’s Frederick County and Mississippi’s Lamar County also participate in SirsiDynix’s program. Among the three, about 100 debit cards have been activated and generated around $600 in library revenue.
Swain, the SirsiDynix spokesman, says the cards can serve as an educational tool to help people learn how to pay with plastic in a responsible way. Because users can’t overdraw their funds on the cards, they can’t run up big unpaid balances as can happen with a credit card.
While the debit card program may increase financial literacy among some users, it can help libraries financially while also broadening the scope of the services they provide in a quickly changing world. So it may be worth a look if it becomes an option at your library.