There is a significant increase in the popularity of prepaid cards. This phenomenon was greatly noticed in the past years. The demand for these alternatives increased so much that transactions possibly reached $7.2 billion in a year. Even employers joined the bandwagon and started issuing cards rather than a paycheck. Prepaid cards are re-loadable spending plastics that also carry Visa and MasterCard logos, but are not considered a debit or credit card, not even gift cards. Users need not open a bank account nor apply for a credit line. Just add money and it works the same way as credit or debit cards. Hence, if you are not too sure about opening a bank account or you maintain that a credit card will not work for you, then go for this type of card.
There is no question that prepaid cards are the popular choice these days. Overspending is avoided because you literally just can spend money that you have. Therefore budgeting becomes easy too. You can cancel the inconvenience and unsafe carrying of cash all the time. Sometimes, it is the best thing to use for online purchases because you do not have bank details to protect. Moreover, you are assured that no unnecessary debits are deducted from your available limits because you technically have already paid for your purchases.
Parents give their kids prepaid cards as allowance or shopping money. This sounds more convenient, right? Re-loading is also easy because most of the time, parents can just do that online. Children are taught to become wiser in their spending. Popular use for these cards is to give away as a birthday or Christmas present since teenagers these days prefer shopping for stuff online.
Like all financial matters affecting stability, using this type of card has its disadvantages. Fees that come with a prepaid card are normally overlooked. Analysts think that this is such an unstable substitute to a debit card/checking account. You need to pay a fee to activate, re-load, and withdraw which are not necessary for credit cards. Some companies charge as much as $30 to activate while the average activation fee is $10. You are lucky if you find a service that does not charge activation fee at all. You may also be charged up to $5 to re-load. Monthly fees may cost you up to $10 while dormancy fee, when you do not use your card for two or three months, may also cost you a few dollars. Withdrawing cash from the ATM will set you back by $2 added to the ordinary ATM fee.
Study the basics so you will know whether this will work for you or not.