A prepaid debit card can be used to complete offline and online transactions just like a credit card can. However, there are significant differences to be aware of. One big difference is that a prepaid debit card will not help or hinder your credit. This is because you are not making use of anyone else’s money; the money that is on a prepaid debit card is your money. You place funds from your own bank account onto the card ahead of time, then use it when you want to purchase something offline or online. In addition, because you are not borrowing anyone else’s money when you are using a prepaid debit card, you will not be charged interest on your purchases.
There are many other fees and charges you need to be made aware of before you sign up for and use prepaid debit cards. One such charge is a monthly service charge. Consumer Action conducted a survey earlier this year that involved 28 prepaid cards; of those 28 cards, 20 of them carried a monthly maintenance fee. The highest monthly maintenance fee was READYdebit Visa Prepaid Platinum’s $14.95.
PROs & Cons of Prepaid Debit Cards…
Another fee to be aware of when it comes to prepaid debit cards is the ATM withdrawal charge. This occurs when you use your prepaid debit card outside of the issuer’s network. The charge can range from anywhere between $1.95 to $3.00 according to Consumer Action. In addition, when you reload money on your card, many issuers will charge you for this as well.
If you want to receive a statement in the mail regarding the usage of your card, be prepared to pay for this as well. Bankrate conducted a survey of the top 18 prepaid cards in May 2012, and of the 18, over half of them charged customers between $1.00 to $5.95 to receive a paper statement. In addition, if you decide to not use your card for an extended period of time, 6 of those cards will charge you between $1.95 to $5.95 for the inactivity.
If you need help with your balance or with another issue regarding your prepaid debit card, you guessed it: You’ll need to pay for that too. Out of the 18 cards surveyed by Bankrate, 10 of those cards charge between $0.50 to $2.00 in order for you to talk to a customer service agent. In addition, 2 of the 18 will charge you $0.50 just to access automated help. Imagine that, you have to pay even when you don’t talk to a live person!
Additionally, there are other fees you need to be aware of when you use a prepaid debit card. For instance, if you need to have your card replaced if it is lost or stolen, you’ll need to pay for this. Additionally, if you are traveling overseas and need to make a payment, you’ll pay to have your payment changed to the international currency that is needed.
With all of these fees, you may wonder why you would want to apply for a prepaid debit card? Well, for those whose credit report is not good enough to obtain a quality credit card or who are riskier to provide credit to (such as college students who have no previous credit track record), a prepaid debit card may be the best and only option.
Additionally, there are ways to avoid these fees if you use proper management. These are usually mentioned in the disclosure statements that many people fail to read fully. One common fee that can be avoided is the fee that is charged when you want to check your card balance at the ATM machine. Instead of checking it at the ATM, you can either check it online via your computer, tablet, or smartphone or you can set up text alerts that will be sent out when your card balance reaches a specific level. Under these options, you will not be charged a fee, yet still learn what your specific card balance is so you can plan accordingly.
As you can see, when you apply for a prepaid debit card, you have to be fully aware of all of the fees that come with it so that you are not spending extra money you may not have. However, prepaid debit cards can be a good option for those who cannot gain a credit card due to poor or non-existent credit history, plus can be safer to use than carrying cash around. By being vigilant about your prepaid debit card fees and knowing the terms and conditions of your specific card, you can use your prepaid debit card to its greatest benefits and with the lowest amount of fees possible.
Hidden Fees with Prepaid Debit Cards…