Are Prepaid Cards A Good Option

Prepaid cards are reloadable and can be used for purchases at businesses that accept credit cards and can sometimes be used for ATM withdrawals. A prepaid card should be used in addition to having a traditional bank account but should not solely for money transactions.  

There are many advantages to using prepaid cards but there are also many disadvantages.  Prepaid cards work similar to debit cards for making payments or purchasing items.

Prepaid cards are helpful for those who cannot get a credit card or open a bank account due to bad credit. Some consumers have been scammed by companies regarding prepaid cards.  

Over 100,000 consumers who paid for payday loans online were tricked into paying for prepaid cards instead.  Consumers signed up for payday loans but were tricked into signing up for prepaid cards with a zero balance.  

Pros

1. Reloadable
2. Used at businesses that accept credit cards
3. No credit check
4. No minimum balance and free direct deposit
5. Easier than obtaining a credit card
6. Returning goods or canceling services treated the same as cash
7. May get perks such cash back rebates or airline miles
8. Must be 18
9. May help control spending

Cons

1. Fees - activation fees, monthly fees, hidden fees
2. Less protection against loss or theft
3. Payment history not reported on your credit reports
4. Do not adhere to the same security guidelines as traditional credit cards
5. If the bank goes bankrupt your money on the prepaid card may be lost forever
6. Unable to exceed the spending limit if needed
7. No protection against theft, identity theft and scams
8. Some banks may assess overdraft fees even if the card is stolen
9. Not regulated by same laws as standard debit or credit cards.