Chicago Transit Authority Tries To Ease Concerns About Its New Ventra Card’s Fees

Consumers making purchases with the Chicago Transit Authority’s coming Ventra combination transit and general-purpose MasterCard prepaid card are expected to incur maximum user fees of $8.45 in a given month, provided the cardholder triggers all the expected fees in that time period, according to processor First Data Corp.

The expense projections were disclosed in the wake of recent withering criticism of the card’s fees in the Chicago press and by public officials.

A spokesperson says First Data, which will process transactions made using the prepaid portion of Ventra when it launches later this year, expects cardholders to incur an ATM usage fee of $1.50 once every three months for domestic withdrawals, a cash reload fee of up to $4.95 once every two months and a $2 customer-service fee, which is triggered by asking an asking agent for balance and recent transaction information, which is available online, by text message or e-mail, twice year. Transit use will incur no fees.

While the new projections suggest most Ventra cardholders are unlikely to incur fees for using the prepaid portion of the card most months of the year, the actual fees cardholders pay will be based on their payment habits.

“The user fees consumers pay on prepaid cards depend on how they use the card and the fee structure of the card,” says Ben Jackson, a senior analyst who researches prepaid cards for Mercator Advisory Group Inc., Maynard, Mass. “The fee structure on the Ventra card is about in the middle of the pack.”

A CTA spokesperson says consumers have multiple options to avoid fees on the prepaid card, such as using the automated customer-service system to check their balances. Cardholders also can get cash back when making a retail purchase, which can help them avoid ATM fees.

Ventra is expected to be the primary vehicle behind the CTA’s open-fare payments system that will accept contactless chip cards. Riders not opting for a Ventra card will be able to pay for fares on buses and at turnstiles in “L” rail stations by using a major-brand contactless debit or credit card, as well as by purchasing single-ride and one-day paper fare tickets.

The CTA, which provides about 500 million rides a year, is the largest U.S. transit agency so far to commit to tap-and-go open-fare payments systemwide, the other being Utah Transit Authority in the Salt Lake City area, which is considerably smaller. The CTA’s lead vendor in the $454 million project is San Diego-based Cubic Transportation Systems. The Pace bus system serving suburban Chicago also will use Ventra.

Despite efforts to quell elected officials’ concerns that consumers could be gouged by Ventra’s myriad prepaid card fees, such as a $2 dormancy fee if the cardholder does not load the card for 18 months and a $6 balance-refund fee for cardholders who close their account, controversy around the prepaid card continues to swirl. (A cardholder can avoid the latter fee by writing a check to herself for the full balance using free Money Network checks.) CTA officials appeared earlier this week before an Illinois House of Representatives committee to answer lawmakers’ questions about the fees.

The CTA has embarked on an outreach campaign to Chicago aldermen and local community groups, such neighborhood chambers of commerce and churches, to explain how the Ventra card works and its fee structure. Also, a list of user fees is available on the CTA’s VentraChicago.com Web site. “One thing we are making clear is that the prepaid feature is optional,” says the CTA spokesperson.

Jackson considers the outreach program to be a good start on the education front. “Because of its neighborhood orientation, Chicago has a lot of community activists that can help with consumer-education efforts,” he says. “That ground-level contact can be effective because consumers tend to trust information they get from people they know more so than they do a marketing campaign or ad. Key to making consumers comfortable with the prepaid feature of the Ventra card will be explaining its value.”

Concerns that unbanked consumers or consumers with limited banking relationships will not fully understand the Ventra prepaid card’s potential fees are overblown to a certain extent, according to Jackson.

“There are a lot of people that drop bank accounts because of the fees and they become unbanked, but that does not mean they are not fee sensitive,” he says. “[Prepaid card program manager] Green Dot incurs a lot of churn among its cardholders and it can be argued that is due in part to cardholders shopping for a better value by finding alternative prepaid cards with a lower fee structure.”