Prepaid Debit Cards: Pros & Cons - WMC Action News 5 - Memphis, Tennessee

Prepaid Debit Cards: Pros & Cons

A lot of folks with lousy credit, no credit or no control over their spending may have to consider PREPAID DEBIT CARDS.

Prepaid cards only allow you to spend what you've deposited into the account.

A report from the Wall Street Journal and Bill Hardekopf of www.lowcards.com say there are pros and cons to prepaid debit cards:

    THE PROS:

    * They train irresponsible money managers to control their spending.

    * It's nearly impossible to incur overdraft fees.  If you try to "charge" more than was deposited in the account, the purchase is simply declined.

    * They give purchasing power to folks with bad credit or folks who don't have credit yet, like some college students.

    THE CONS:

    *  They can't help you establish a credit history.  That's bad for the college student who's trying to get credit.

    *  They don't provide the purchase protections that credit cards or normal debit cards offer.

    *  They often have activation fees as high as $20 and transaction fees as much as $1 a purchase.

Hardekopf says once a prepaid card is lost, there's no way to close its account.

"If those cards are lost and used by someone else, you don't have much recourse," he says.  "Those can be hard lessons and sometimes costly, and that is why we recommend getting a student a credit card when they are in high school so you can watch/monitor them while they are under your roof and can talk all that out."

lowcards.com regularly shops credit, debit and prepaid cards -- their costs, their offers, their pitfalls, their gotchas.  Click here to link to its latest ratings of prepaid cards:

http://www.lowcards.com/prepaid-debit-credit-cards.aspx

 

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