Prepaid Debit Cards quickly became a hot topic awhile back when Suze Orman started championing them. Despite all of the heat she took, there is a place for Prepaid Debit Cards and they can be a good thing in certain situations.
Pros to Prepaid Debit Cards
1. They can be used just like a credit card.
Whether you get a Visa or Prepaid Mastercard, these debit cards are accepted wherever Visa and Mastercard are accepted…despite the fact that they aren’t credit cards.
2. No credit is being offered.
While this may be a “con” for some people, the reality is that prepaid debit cards are exactly that: you have to load (prepay) a specific amount on them and you can only spend the amount you’ve loaded onto the card. This is extremely beneficial in the fact that it doesn’t allow you to go into debt!
3. It’s easy to get approved.
The majority of people that are in the market for prepaid debit cards have terrible credit and may even have marks on their banking history. Being somebody that was flagged in ChexSystems database, I personally know how difficult it can be to cash checks, pay bills, and make purchases if you don’t have a bank account.
The prepaid debit cards are a great solution for those people that can’t have or don’t have a bank account. Some prepaid accounts will allow you to setup online bill pay with your utility companies and it gives you an avenue to pay other bills via “credit card.”
4. Direct Deposit.
The majority of prepaid debit cards offer a direct deposit option, and some even off you a bonus to do so! Instead of finding a place to cash your checks (particularly if you don’t have a bank account), you can now have your paycheck directly sent to your prepaid debit card account.
1. Fees, Fees, Fees.
The reason Suze Orman got blasted for promoting these cards is because she tried to downplay all of the fees that are associated with these accounts. Fees vary by card but they could include: activation fees, reload fees, ATM fees, and even fees for purchases.
If you’re looking for a prepaid debit card, then make sure to do your homework. While a traditional checking account will be the cheaper route, if you don’t have that option be sure to compare as many cards as possible and find the one that will best fit your needs.
2. They don’t build credit.
Some people have the misconception that these debit cards will help build your credit, however they simply don’t. Don’t be fooled by the “Visa” or “Mastercard” logo; these cards are nothing more than a high-priced checking account without the check writing privileges.
Overall, there are many pros and cons to prepaid debit cards; if you’re in the market for one, I’d simply encourage you to shop around and make sure you find one that best meets your needs. Always be weary of the fees, but other than that they are a viable option for those than are unable to open a checking account through a traditional bank.
