Western Union also says it hopes to serve U.S. consumers hurt by the credit crisis. "Because of the credit crunch in the United States, with some customers actually getting their [credit] line cut or cut off altogether, prepaid opens up a new door for us," said Stewart Stockdale, Western Union executive VP and president of the Americas, in a media conference.

The effort kicks off Western Union's Random Act of Giving campaign, giving away $250,000 worth of $50 prepaid gift cards to randomly selected Americans. The Wyclef Jean prepaid card features the artist's name and likeness, which he handed out in Manhattan's Times Square before performing a free lunchtime concert on Monday. Western Union also donated $225,000 donation to Jean's charitable organization Yéle Haiti, to support education in Jean's native Haiti.

It's all a heartwarming idea, but giving in the U.S. this season is likely to be influenced by a greater factor: cost. Prepaid gift cards let customers send money for less than a wire transfer; there's a one-time $5 load charge and a $1 fee for ATM use, but standard shipping is free, and there's no monthly fee on the card. (Western Union will charge $2.50 each month after 12 months of inactivity, as federal law permits.)

Those fees are in line with other issuers of prepaid cards, but gift-card buyers should note the fee of international transactions: any money obtained in a currency or country other than the one where the card was purchased can incur a conversion rate of up to 1%. That means that loved ones outside the U.S. could lose a dollar for every $100 sent from the U.S.

Still, even with the fee, the overall cost could be cheaper than an international wire transfer. Sending $500 to Jamaica, which normally costs about $20, compares with just $11 in fees from getting the money off a gift card ($5 load fee, $5 transaction fees, a $1 ATM fee) sent by free standard shipping.

That's a decent deal for consumers, but critics of prepaid gift-card cards feel the deal could be better. "There should not be any additional fees attached to gift cards after the initial purchase fee," says Michelle Jun, staff attorney for Consumers Union, which publishes Consumer Reports.

Jun says American Express (AXP) recently dropped all fees attached to their gift cards, except the initial purchase fee. "We're hoping other issuers would do the same," Jun says.