8 Advantages Of Prepaid Debit Cards

The history of prepaid debit cards has been spotty. There were many celebrity-endorsed cards that charged high fees. However, there are several benefits provided by prepaid debit cards, and their popularity has never been greater. Consider that their use has grown from less than $1 billion in 2003 to $100 billion in 2014. The use of these cards is expected to grow even further.

Many younger consumers lack the credit history and credit score to qualify for a credit card. Other consumers enjoy the unique benefits provided by these interesting cards.

Consider these benefits of pre-paid debit cards:

      1. It’s an effective tool to control your spending. You might be able to overdraft your checking account numerous times each month, but most pre-paid debit cards will stop you once your balance runs dry. When the money is gone, it’s gone. Knowing that you have a hard stop will keep your focus on your balance and spending.

      2. Overdraft fees are non-existent. You can save yourself a lot of money by avoiding overdraft fees. Even a $1 overdraft can turn into a $45 fee. There’s no reason to worry about racking up overdraft fees with your prepaid debit card.

      3. There are no credit checks. Do you have bad credit? No problem. Since you can’t owe the debit card company any money, no one cares if your credit score has seen better days. You’re spending your own money, and the debit card company takes its fees out at the beginning.
          • They’ve already made their money from you when you purchase or reload the card.

      4. Your credit isn’t affected. This can be very important in certain situations. If you need to make a large purchase before applying for a loan, using a credit card could significantly affect your credit score.
          • A large purchase on a prepaid debit card won’t show up on your credit report and has no effect on your credit score.
          • Using a credit card for a large purchase, like an appliance, could result in the rejection of a loan application.

      5. You have more privacy, to a point. It’s possible to purchase a prepaid debit card up to $250 and use it without identifying yourself. However, you’ll have to provide your identity when you reload the card.

      6. You’re able to make ATM withdrawals. You’ll pay a fee, but you’re able to access the funds in your account at most ATMs. This is helpful if a store doesn’t accept credit cards.

      7. You receive many of the same protections available to credit card holders. Prepaid debit cards receive the same protections as a credit card on the same branded network. Therefore, your Visa prepaid debit card is just as safe as regular Visa credit card.

      8. Direct deposit is an option. It’s possible to have part of your paycheck directly deposited to your prepaid debit card. Consider using this feature to pay for all of your groceries, gas, clothing, and entertainment each month. You’ll be more careful with your spending, and the money will be available each month without any work on your part.

The primary disadvantage of these cards is the fees. Spend some time shopping for the best deal, and this disadvantage is minimal.

Prepaid debit cards have many advantages, but aren’t a solution to every circumstance. Prepaid debit cards do have a few unique benefits that aren’t found in other payment options. If you’re looking for a unique way to control your spending, or your credit score is less than great, a prepaid debit card can be an effective option.

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