Prepaid debit cards can be an option, allowing customers to enjoy the ease of direct deposit, the flexibility of a being able to pay with plastic, and the organization of online bill pay. Prepaid cards allow users to load cash on them and use them to withdraw money or make purchases, both at home and abroad, wherever debit and credit cards are accepted. These cards work a lot like a gift card; you will have to load the account with cash (direct deposit is usually available) before you can use it for a purchase.
Prepaid debit cards have become quite popular in the past few years. This is especially true for those who don’t have a traditional checking/savings account through a bank. A prepaid debit card, can be used most anywhere that you shop. You can buy groceries, plane tickets, go to a movie, and many other things. If you run out of money, you can reload the card. It’s also a good alternative to carrying cash. But while everyone talks about all you need to know about prepaid debit card and its pros, without highlighting its cons, this article explains why a prepaid debit card may not be the best for you. Let’s take a closer look at what prepaid debit cards offer.
Why You Should Not Get A Prepaid Debit Card
Prepaid Debit Cards Have Unregulated Fees
These cards lack regulatory constraints. Prepaid cards can get expensive because the card issuer has great latitude over fees charges to activate the card. Fees for any type of bad credit or unsecured card are typically high, but prepaid cards are the worst.
Some prepaid credit cards charge annual membership fees, monthly maintenance fees and others charge users every time they add funds to the account. Prepaid credit cards are really just a pricey alternative way to get a debit card for people who don’t qualify for a checking account.
Since very few prepaid credit cards are offered by local banks, you can also expect to rack up ATM fees every time you withdraw cash. Usually, you’ll pay fees for activation, ATM withdrawals and more.
The kind of protection you get against fraud and unauthorized charges on your prepaid card varies among card issuers; some card providers have stronger protection than others.
Funding Prepaid Debit Card is Difficult
Adding funds to prepaid debit cards can be a real hassle. Usually you have to pay a fee to add funds at retail outlets and the money may or may not be available right away. In some cases it can take two to three days to show up. That’s not a lot of help if you have an immediate need to use the card.
Some prepaid credit cards will allow you to add funds from your checking and saving account . Although, if you already have a checking account with a debit card, then why would you need a prepaid credit card? reload money to the card.
There’s No Credit Involved
The bank does not lend you money, they just hold onto your money until you spend it. Since there’s no revolving credit limit involved, the banks do not report your payment history to the three major credit bureaus. Prepaid credit cards do nothing to affect your credit score either positively or negatively. Many people use prepaid credit cards under the false assumption that they are improving their credit. The last thing you want to do is have a prepaid debit card cost half the amount you loaded on the card, just to use your own money.
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