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Prepaid cards have become the go-to alternative to traditional bank accounts and credit cards, yet many still have hidden fees and lack basic safeguards, exposing consumers to risks that could leave them financially devastated.

Because more consumers have bad credit or are trying to avoid credit-card debt and bank fees, prepaid cards have grown in popularity. By the end of 2014, prepaid card users in the United States are expected to add $167 billion to their accounts.

Yet the industry remains largely unregulated and devoid of the protections that most bank accounts and credit cards offer, raising concerns that some American households may be vulnerable to shady prepaid-card practices.

“Depending on what you’re planning on using the prepaid card for, it could be completely useless,” said Odysseas Papadimitriou, CEO of, a credit-card education site. “You could end up spending a bunch of money and not get what you need.”

Consumer Reports reviewed 26 prepaid cards and ranked them based on hidden fees, ongoing monthly fees, whether they can be used at ATMs, protection against fraud or bank failure, and transparency about their policies and services. Some cards charge users high fees for “inappropriate” reasons, such not using the card, needing a replacement card or calling customer service, according to the report.

With some prepaid cards, there’s no guarantee you’ll ever get your money back, said Michelle Jun, a senior attorney at Consumers Union.

“If someone steals your wallet, it’s pretty much up to the company,” Jun said. “But you can’t point to a federal law or regulation to save you.”

Cards such as the American Express for Target, which Consumer Reports ranks last, have no protection through the Federal Deposit Insurance Corp., the federal agency that insures bank deposits.

Not all prepaid cards are risky. Jun said many companies have added insurance, lowered their fees and improved policies so their cards function nearly the same as a checking account.

The U.S. Consumer Financial Protection Bureau is cracking down on unfair prepaid-card practices, and last year asked for input from consumer groups to ensure that consumers’ funds on prepaid cards are safe and that card terms and fees are transparent.