TORONTO -- With an eye to the holiday shopping season, the Royal Bank has become the first major financial institution to move on upcoming regulations to make the fees and conditions for prepaid plastic cards more transparent.

RBC (TSX:RY) said it is dropping expiry dates on its prepaid Visa gift cards, which run in value from $25 to $500, and all fees beyond the initial $3.95 activation charge.

"The (government) regulations are proposed regulations at this point, but we decided we needed to go in advance and go over and above, particularly in the run-up to Christmas," said Anne Koski, head of RBC's pre-paid card division.

Koski said a survey conducted by the bank found more than four in 10 respondents said the existence of an expiry date, after which any unspent funds are forfeited, was a reason not to purchase the cards.

RBC said its prepaid cards will continue to show an expiry date but a new card can be requested at no charge if a balance remains after that date.

Last month, Finance Minister Jim Flaherty announced his intention to make expiry dates illegal on the cards and to demand upfront disclosure on any hidden fees.

Flaherty's press secretary, Kathleen Perchaluk, issued a statement welcoming RBC's early response.

Other institutions are expected to follow suit, before or after new regulations are issued -- likely in January.

The Bank of Montreal said it does not issue gift cards, but does offer prepaid travel credit cards whose funds do not expire.

While still a small segment of the market, prepaid plastic has become an option for consumers without conventional credit or debit cards, young adults, and for parents who want to introduce their children to using credit while limiting the risk of theft and over-spending, as well as for those buying them for gifts.

Koski said the cards are especially popular in the weeks as months before Christmas as gifts to children, who can use them as they would cash -- or to shop online.

But the sector has faced criticism for hidden fees that reduce the face value of prepaid credit cards. These can include monthly or annual fees, maintenance costs, as well as ATM charges.

The most notorious example occurred two years ago when Hollywood celebrity Kim Kardashian backed away from endorsing a prepaid card bearing her name after a public outcry over the card's usage fees, including a close to $60 activation fee.

The card even grabbed the attention of the attorney general of Connecticut.

The Financial Consumer Agency of Canada offers a tip sheet on their webpage about the prepaid cards, advising consumers to be aware of hidden costs. The agency points out that a $4.95 activation fee on a $50 card represents almost 10 per cent of the prepaid value.

The new regulations in Canada would require an information box disclosing the fees displayed prominently on the exterior package and other documentation prior to issuance.

The Opposition has called the new rules a "small step in the right direction," but charged that Flaherty was still ignoring the issues of sign up, usage and reload fees which could cost between $1 and $40.