We all use credit and debit cards. We use them to purchase stuff for overseas and domestic retailers. They are a substitute for hard cash, when you are out there to enjoy shopping, or when an uncalled for incident arises and you don’t have a dime in your wallet.
Having a debit card in your wallet translates to buying stuff with ease. Just as there are debit cards, issued by banks against the checking accounts of their customers, there are prepaid debit cards, a relatively new phenomenon, which you may or may not heard of yet.
Not a debit card
That’s right! A prepaid debit card is different than a regular debit card. It’s best to describe it as a cross between a debit and a credit card. It’s not linked to your bank account and it is reloadable, meaning you can refill the money, tagged with the card when it dries up.
No bank account
Credit and debit card issuers like Visa, American Express and MasterCard have historically offered their services through the banking system. But for a prepaid debit card, you don’t need a bank. There are over 70 million people in the United States, who don’t have a bank account, and who don’t want to have one either.
Having a prepaid debit card can make life incredibly easy for them. Using the card, they can purchase everything. After every transaction, they need to refill the card by putting on the same amount, they have used for the transaction.
Prepaid card benefits
Everything has positive and negative sides. The positive sides of a prepaid debit card include being able to access a card with poor or even zero credit (it’s unthinkable for anyone, who holds a regular debit card), restriction of potential losses, better money management, etc.
Since there’s a fixed amount of money against a prepaid card, you can never go beyond that amount. Hence, you can never spend extravagantly even if you so wish. If you have bad or no credit, you can still use the prepaid debit card.
Prepaid card disadvantages
Just as there are advantages, there are disadvantages. You need to get a hang of them. Only then, you’d be able to decide whether you need a card.
The first disadvantage of a prepaid debit card is the slew of fees. Having such a card means paying a monthly/annual fee, ATM withdrawal fee, reloadable fee, paper statement fee, etc. When you count all these fees, you see the card is more expensive than a normal debit card.
If you are going through a financial distress, then you wouldn’t want to hold a prepaid debit card because the plethora of fees will make your wallet lighter. That’s the reason experts recommend people with financial problems not to apply for one.
Another problem is technical issues. Take the example of RushCard. The users have suddenly found that they are not able to use their cards. The statement from the company that the problem is due to technical reasons couldn’t pacified the pissed consumers.
Use with caveats
If you think a prepaid card will be the best for you, then I advise you to use with some caveats. The very first thing you need to do is track all the account activities. Always keep yourself updated about the balance in your account and read the fine print carefully to make sure the paper statement doesn’t cost you.
Avoid those cards, which necessitate a credit check because the very reason you are opting for the card is you have poor credits, and you don’t want to dig up the skeletons, right? Hence, avoid all agencies that ask for a credit report.
The card issuers often have merchant return policies. Such policies allow you to return the item you’ve purchased even after you’ve exhausted your funds. What you need to do is keep all the receipts of all the purchases made by your using the card. Keep both online as well as physical copies.
Fee structure difference
Different cards have different fee structures. Understand the differences. Some issuers waive fees when a card carries a considerably high balance, a direct deposit on a card, or when the customer pays the retailer, selling the card with cash checks.
Being able to find such an issuer means you’d be paying less amount of fees.
Make up your mind
Don’t listen to others, think for yourself. Ask yourself what your priorities are, and whether having a prepaid debit card can meet those priorities. Take everyone’s advice but not the decision. Take that yourself.