Prepaid debit cards are being touted as a way to manage your money and stay out of debt. With a prepaid debit card, you can only spend the amount of money that is on the card. But that's good, isn't it? Maybe. These cards can be more expensive than you think. These cards may be useful for travel or providing funds for a college student. Some people use them to help them budget.
There are many issuers of prepaid cards. Examples include RushCard, Green Dot, and even Walmart. If using a prepaid card interests you, then here are some tips to help you decide.
Check out the fees. Fees are typically charged for activation and reloading. But fees may be charged for withdrawals, checking balances, calling customer service, paper statements, inactivity, and other transactions. Some cards may also charge a monthly fee. Read the fee schedule carefully because the number of fees and the fee amounts can vary widely from card to card.
Building credit history. Since these cards are not credit cards, most issuers do not report your history to the major credit bureaus.
Term changes. The terms of prepaid contracts are subject to change at any time which include the fees charged. Be sure to read the terms of service carefully. Look particularly for rules for the use of the card and liability for unauthorized transactions, and what to do if the card is lost or stolen.
Tracking transactions can be difficult. Typically, the only free way to check your balance is online. Many issuers charge for checking your balance and for paper statements.
Prepaid cards are an evolving market, so if you use one, you'll need to keep up with the changes.
While prepaid card may have some uses, we recommend that you stick with your credit union debit card for most purposes.
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