Prepaid debit cards can refer to several different types of cards that have a prepaid amount of cash paid by the consumer on them. Sometimes when people refer to these cards they are really discussing gift cards that can be used in any location and may have a Visa® or Mastercard® logo on them. Typically these cards are sold in designated amounts and the card is usually discarded once the money is spent.
More often, the term prepaid debit cards refers to cards people get from various retail merchants or online. Money on the card can be reloaded at many retail places, as needed. There are numerous prepaid debit card programs and they may be most used by people who want to keep complete track of their spending.
Other potential users of these debit cards include those who prefer them as alternatives to having a bank account or who can’t get a bank account because of poor banking history. Some prefer the cards for online shopping. Though many can shop online with bank debit cards, they may be more worried about security if their card number is stolen since it could give thieves access to their bank account. Another potential use is to control the spending of teens or young college students who are managing money for the first time, where parents deposit money on the card and review spending with teens.
Typically, people who use prepaid debit cards sign up for a debit card program. Unlike getting a bank account, there is usually a fee to sign up, though some cards offer money back deals on initial sign up fees. People may also be charged a weekly fee and pay transaction payments for each transaction.
The business of charging for transactions, program sign up, and continuation in a program may make prepaid debit cards less attractive, and some argue that these cards take advantage of those with poor credit who cannot get a bank account. Many do offer direct deposit of paychecks so that they function very like a bank account in other respects, but are usually more expensive. Those considering signing up for these programs should evaluate the cost versus benefits of prepaid debit cards and available plans.
On the other hand, some believe the fees are worth it, especially if they’ve had trouble keeping spending under control and tend to pay huge fees when they bounce checks. Even regular weekly fees and transaction charges may be far less than it costs to pay overdraft fines. Some find they are able to better control spending when they use a debit card attached to a bank that publishes near instant results of purchases online. This may be a viable means to keep spending under control that ultimately costs less than prepaid debit card plans, but it is not available to those who can’t get a bank account.
