The popularity of prepaid cards has significantly increased in the past years. Demands for these alternative plastics have exploded and it is predicted to have at least $7.2 billion in transactions every year. Some employers have in fact chosen to issue prepaid cards instead of a paycheck. These cards are actually re-loadable spending cards. Although cards carry the Visa and MasterCard logo, they should not be mistaken for a debit/credit card or even gift cards. People use is to pay without having to open a bank account or applying for a credit line. You just have to add money to its balance and it works the same way as debit or credit cards. If you cannot open a bank account for some reason or you cannot trust yourself in handling a credit card, they say this is the next big thing.
Others have pointed out the other ways and reasons prepaid cards are a popular choice these days. One gets to budget and avoid overspending when using these cards without sacrificing convenience and safety from bringing all that cash. Some would use it to purchase online, things that auto-renews such as magazine subscriptions. Since the card is already prepaid, chances of your online purchase eating up your credit are very minimal and bank details are never compromised.
In some cases, parents would issue kids prepaid cards instead of giving out allowance or shopping money. It is more convenient and can be re-loaded with cash online. These cards are also perfect as birthday or Christmas gifts since older kids now prefer buying stuff online.
Like every decisions that affects financial stability, one must study the cons these cards may bring. There are actually fees entailed when availing a prepaid card. Some experts say that there are so many hidden fees that it could be considered an unstable alternative to a checking or debit card account. Some fees are needed to activate, re-load, and withdraw, among others. Some cards charge about $30 to start and activate a card; some do not charge at all and average activation fee is at $10. There is a re-loading fee of up to $5 for every transaction, but a paycheck direct deposit is usually free. There are monthly fees and most cards would cost you $10. You also get charged for not using your card for two or three months. You may choose to withdraw cash from the ATM, but it will set you back by $2 atop the usual bank’s ATM fee.
See, using a prepaid card is a two-edged sword. It is always best to study the pros and cons to decide whether it will work for you.