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Why To Buy (Or Not Buy) Prepaid Credit Cards

credit cardsThe market for prepaid credit cards is growing by leaps and bounds, mainly because banks see them as a gold mine. They’re also finding that the best way to get these cards in the hands of consumers is with endorsements from celebrities – witness the new Justin Beiber card.

Are they right for everybody?

If you have a tough time getting a traditional checking account, prepaid cards can be a good deal. This is also true for people who just don’t want a checking account. I recently saw a study reporting that there are 9 million “un-banked” people in the US. While some of these are people can’t get checking accounts, many just don’t want one. For them, prepaid cards can be very attractive.

No restrictions

One of the things that make these cards appealing is that there are no qualifications. Plus, they basically work the same as reloadable prepaid debit cards. You use them to buy things just as you would with a regular credit card. Assuming that your balance is big enough to cover the cost of whatever you’re buying, you’re all set. Plus, a prepaid card can be a good tool for budgeting since you have to determine how much you want to load onto the card and then live with that amount. And, of course, there’s no worry about building up debt as you might with a credit card.

The biggest negative

The one big negative of prepaid cards is that they can’t help you create a credit history. If you don’t want or need to have a credit history, then it doesn’t make any difference. But if you’re just starting out and do want to build a credit file, these cards won’t help. The reason for this is because how you use them is not reported to the credit bureaus. So if your goal were to create a credit history, you would be much better off getting a secured card as your usage would be reported to the credit bureaus.

Heavy-duty fees

In addition, many of these cards can come with serious fees. There are cards that charge a $3 monthly “maintenance” fee and others that charge as much as $2 per transaction, plus any fees that are charged by the ATM operator or owner. Wal-Mart has gotten into the prepaid card act with its MoneyCard that costs $3 to buy (or free if you buy online), $3 to reload and a $3 monthly fee. The reload fee is waived if you use direct deposit or cash a check at a Wal-Mart store and the monthly fee is waived if you deposit at least $1,000 on the card in the prior calendar month.

Two good cards

There are two new cards from American Express called Bluebird and Serve. They both feature unique benefits and fewer fees. It is believed that these cars will pave the way for prepaid cards from other card providers that will be better for the unbanked and under-banked and those consumers who just don’t want anything to do with banks.

If credit cards have gotten the best of you

If you have been unwise in your use of credit cards and have created too much debt, you might want to look into debt settlement. This is where we negotiate with your creditor to get your debts settled for less than you owe. In fact, we can usually settle unsecured debts for pennies on the dollar. Call our toll-free number today to learn how debt settlement works and if it could help you reduce your debts and become debt free in a reasonable amount of time.

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