Prepaid Cards: Are they really a Better Alternative to Credit Cards?
You may have heard quite a bit about prepaid cards as of late, as many consumers and financial experts are touting their convenience and practicality. In fact, because of the poor credit sector and the inability of many consumers to obtain credit, prepaid cards have surged in popularity.
Prepaid Cards: How they Work
The concept behind prepaid cards is quite simple: a consumer purchases the card from a retailer and loads it with money. The prepaid card, which may be partnered with Visa, MasterCard, Discover and American Express, can then be used as a consumer would use a debit or credit card; to purchase items through retailers or to pay bills online.
Prepaid credit cards require no credit check, and are quite simple to get and load with money. It is no wonder then, that in 2008 alone, consumers loaded nearly $8.7 billion on prepaid cards; that’s up about $4 billion from the year before.
Prepaid Cards Popular Among College Students, those with Poor Credit
For individuals who may not be able to secure a regular checking account, a prepaid card may be a practical alternative. Often times, parents use them as a cash source for their teenage or college-age children, while others with little to no credit use them as they would any other credit card.
Given the fact that the new credit card legislation, when it goes into effect in February, will further restrict the ability of college students to obtain credit, it only makes sense that prepaid cards will see a further increase in popularity.
Prepaid Card Fees to Watch for
It is important, amidst all of the advantages, to know that prepaid cards do come with activation fees, and most of them charge for ATM withdrawals. However, when considering the hefty fees charged by banks and creditors, many consumers are more than happy to pay these fees.
For consumers looking for a simple, practical way to pay bills and avoid credit card charges and bank overdraft fees, prepaid cards may be just what they’ve been searching for.
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