How Netspend Works and Makes Money (TSS)

NetSpend is a company with a prepaid debit card that it claims offers a competitive alternative to checking account debit cards, credit cards and cash. Customers provide the company with their names and addresses, and the company mails them personalized cards that they activate and load with funds. The company claims that its cards offer advantages to consumers who do not have banking accounts, credit cards or access to traditional financial services.

What Is NetSpend?

NetSpend is based in Austin, Texas, and 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 reload points, where consumers can purchase NetSpend cards and load them with cash. The locations include retailers, check cashing locations, convenience stores, grocers, pharmacies, insurance providers and tax preparation companies. NetSpend also provides payroll card solutions that let employers directly deposit paychecks into their employees' card accounts.

How Does NetSpend Work?

NetSpend offers Visa and MasterCard prepaid cards to its customers. State and federally regulated financial institutions partner with NetSpend to issue the cards, which are insured by the Federal Deposit Insurance Corporation (FDIC). The cards allow consumers to add, spend, withdraw and manage money. Customers can access features such as person-to-person bank transfers, direct deposit of employer or government checks, text alerts, a rewards program, budgeting tools and a tiered-rate savings account option.

How Does NetSpend Makes Money?

NetSpend offers its customers three service plans. The pay-as-you-go plan is designed for customers who expect to have a limited number of transactions. With this plan, there is no cost to open an account and no plan fee. Customers pay $1 each time they select credit at a retailer and make a purchase, and $2 each time they select debit, enter their personal identification number (PIN) and make a purchase. Under the company's FeeAdvantage Plan, customers pay no fee to open the account, but they pay a monthly plan fee of $9.95. The plan allows unlimited purchases with either the debit or the credit option at retailers. The Premier FeeAdvantage Plan has no account fee and unlimited debit or credit purchases, but customers pay a monthly plan fee of $5. However, to qualify for this plan, customers must make a total of $500 in payroll or government benefit direct deposits during the calendar month.

NetSpend also charges $2.50 per domestic automated teller machine (ATM) withdrawal, and $4.95 per international ATM withdrawal. The company charges $1 for each ATM transaction decline. The firm charges no fees for direct deposit and online account-to-account transfers, but $4.95 for account-to-account transfers conducted by a customer service agent. NetSpend charges retail card load fees that vary by location, and may charge mobile check load fees. The firm may charge fees for certain types of external bank transfers.

NetSpend charges no fees for online balance inquiries, but may charge fees of 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 assesses fees for declined ACH Debit transactions and stop payment requests. Customers who request a customized card pay a fee of $4.95 per card. The company charges maintenance fees on dormant accounts.

What Do Customers Think?

NetSpend receives high overall customer service marks from its users. The website had 3,149 reviews of the company's products and services as of August 2016. Of the 1,023 reviewers that rated NetSpend, 713 gave the company a four- or five-star rating, 46 gave a three-star rating, 42 rated the company with two stars and 222 gave a one-star rating. Many of the positive reviewers mentioned the ease of activation and the excellent customer service, while some of the negative reviews cited poor customer service.