debit card

The Pros and Cons of Prepaid Debit Cards

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I recently got an offer for a prepaid debit card in the mail. I’ve heard a lot about the negatives and the positives of these cards, so I decided to do some of my own research.

Prepaid Debit Cards Modern Day Slavery

If you’ve read my ranting article about banks you would know that I can’t stand greedy banks that exploit their customers.

I consider the prepaid debit card as modern day sharecropping because it doesn’t seem to add any value to the person who holds the card and there are always hidden fees. And by hidden I mean buried in the fine print. So today I went hunting for some of the features and benefits of the best prepaid debit cards.

Pros of Prepaid Debit Cards

From my research I was able to learn that prepaid debit cards can help build back your credit. If you’re trying to get cash loans online or just buy a house you need to build your credit. There are certain cards that report back to the credit bureaus and as long as you use the card wisely, you can benefit from positive reporting.

Direct Deposit

Most of the prepaid debit cards offer direct deposit. You can get your check directly placed onto your card and have it ready for immediate use.

Accepted as Visa and Mastercard

Prepaid cards can be prepaid credit cards with a Visa or Mastercard logo. There are prepaid Mastercard debit cards and Visa prepaid debit cards. This will give you more flexibility when shopping to have the convenience of a credit card without the debt.

Cons of Prepaid Debit Cards

The biggest con is the exploitative fees.

I consider them to be outrageous. Why should you get charged to use your own money?
Besides the bad fees, the detail on the fees are really difficult to find. I had to actually click through to the apply now button and search under fees to find the card member agreement.
Here are the Fees I was able to find for three popular cards.

Account Now

Activation Fee 4.95

Purchases with a PIN 1.00

Purchases with a Signature 1.00

Calls to a Customer Service Agent 1.00

Using ATM for Balance Check 1.00

Using ATM to Withdraw Money 2.50

ATM Decline fee .40

Closing Fees: If you decide to close your Card Account and request a check to bring your balance to zero, a $15.95 Check Fee will be applied per request.

ACE EliteTM FeeAdvantageTM Plan (Annual)

Activation Fee 0

Purchases with a PIN Included

Purchases with a Signature Included

Calls to a Customer Service Agent Free

Using ATM for Balance Check Free

Using ATM to Withdraw Money 2.50

ATM Decline fee 1.00

Closing Fees None

Account Maintenance Fee: $5.95 per month (waived if Card has debit or credit transaction and/or balance inquiry within 90 days.

UPside Visa® Prepaid Card

Activation Fee 0

Purchases with a PIN Included

Purchases with a Signature Included

Calls to a Customer Service Agent .99 (automated) 2.00 (Live person)

Using ATM for Balance Check .99

Using ATM to Withdraw Money 1.70

ATM Decline fee 2.00

Closing Fees None

Account Maintenance Fee: $0.99 if a minimum amount of $500 is loaded to the card within the calendar month. Otherwise a $2.99 fee applies each month.

After all of these fees, I would consider a prepaid debit card the worst possible choice for wise money management.

I read about personal finance speaker Sakina Spruell using a prepaid debit card to control spending. She experimented with loading the card and using it for everyday purchases. I hope she chose a card with little to no fees.

 

Whatever happened to cash?! You can use cash everywhere cards are accepted. I once had a coworker that only used cash and he always scolded us for using our debit cards for two dollars at QuickTrip. If you absolutely must open a prepaid debit card, make sure to read all of the fine print in the card member agreement before making any decisions. You should do this for credit cards as well. But more on that later.

How about you? Would you consider a prepaid debit card for budgeting?