Squeezing pennies: Big profits from pre-paid debit cards, payday loans


With all the Nobel Prizes being awarded this week, I am reminded that Mohammed Yunus won the Nobel Peace Prize in 2006 for founding Grameen Bank, a micro-lender to the very poor. Yunus's idea was to use finance to help needy people in Bangladesh dig themselves out of poverty.

But micro-lenders in developing nations aren't the only ones addressing the financial needs of people who are too poor to access the mainstream banking system. Visa (V) and MasterCard (MA) have their own version of micro-lending -- though one that is unlikely to receive any awards. Instead, they lend out small amounts on their co-branded, pre-paid debit cards, which are sold largely to the working poor in the U.S., and then collect millions in fees and penalty charges.