There are a lot of commercial on television now for prepaid debit cards, but part of me has to wonder what all of the hype is really about. What exactly makes these prepaid debit cards different than the debit card that is tied to my checking account? Why would I want to have a prepaid card rather than my traditional one? Here’s a quick summary of what I’ve found out.
First, prepaid debit cards aren’t tied to a bank account like a normal debit card. Instead, you purchase a card loaded with a predetermined amount. You are usually charged a fee for the convenience of being able to use the card. Some of the companies I researched charged around $5.
Also, your prepaid debit card doesn’t carry your personal information on it. So, although you won’t have your name on your credit card, you also won’t have to worry about your identity being stolen through your use of your prepaid debit card. Imagine the security you could feel while shopping online.
Fans of the prepaid debit card tout the decreased risk of identity theft and the ability to get a prepaid debit card without worrying about a credit check as prime examples of the reasons people should consider using these cards. Anyone who has ever tried to book a hotel stay without a credit card can certainly understand why everyone, even those with a less than stellar credit history, will find the ability to use a credit card helpful.
Another perk of the prepaid debit card is its use as a budget tool. Think of it as the envelope system of budgeting with a debit card instead of cash. You simply load a portion of your budget onto the prepaid debit card and use it until it’s out of money. Since there’s no credit line attached to the prepaid debit card, you won’t have to worry about spending too much.
These benefits aside, I suspect that I’ll be sticking with my traditional debit card for a couple of reasons. First, I don’t have to pay anything to use my debit card. I know $5 doesn’t sound like much to pay for a convenient service, but it’s still more than I have to spend.
I also don’t like the ease with which someone else could use my prepaid debit card if they were to come across it. Since it doesn’t have my name on it, a retailer would never notice that the person using it wasn’t me. To be fair, the vendors who sell the prepaid debit cards will transfer its balance to a new card if you notify them that you’ve lost the old card. I just worry about what would happen if I didn’t notice that I’d lost it right away.
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17 responses so far ↓
1 Annie Jones // Oct 21, 2008 at 11:31 am
I know of a few unfortunately people who have such poor banking habits that they are unable to get a checking account. These pre-paid debit cards are a way for them to cash their checks (at a store like W-M) and have the money put on a debit card. It’s safer and sometimes more convenient than carrying around the cash.
2 » Prepaid Debit Cards – Are They a Good Idea? // Oct 21, 2008 at 11:46 am
[...] 500 Internal Server Error wrote an interesting post today onHere’s a quick excerpt There are a lot of commercial on television now for prepaid debit cards, but part of me has to wonder what all of the hype is really about. What exactly makes these prepaid debit cards different than the debit card that is tied to my checking account? Why would I want to have a prepaid card rather than my traditional one? Here’s a quick summary of what I’ve found out. First, prepaid debit cards aren’t tied to a bank account like a normal debit card. Instead, you purchase a card loaded with a p [...]
3 Jason // Oct 21, 2008 at 2:48 pm
I have SOLUS Identity Theft Protection. It protects my entire family from identity theft. The website is http://www.solusid.com
4 Prepaid Debit Cards // Oct 21, 2008 at 2:55 pm
I think that prepaid credit cards are a great idea. They are quick and easy and they don’t get you into debt like regular credit cards do.
5 nobrainerdeals // Oct 21, 2008 at 7:12 pm
Thanks for the info. I agree with you I dont think the $5 fee is worth it but if I am buying from a shady online retailer I might sign up for a prepaid just to be safe.
6 Julia // Oct 22, 2008 at 2:08 pm
I’m not much of a debit card user, but a pre-paid debit card sounds like a good idea for when travelling abroad. At least I wouldn’t have to worry about identity theft when using credit cards on vacation.
7 Aya @ Thrive // Oct 22, 2008 at 5:50 pm
I feel like the cons outweigh the pros – but my opinion comes from my spending habits, and I don’t fear identity theft so much since I think twice about where I’m using my card. Also, with the increase in security for identity theft, that seems less likely and less devestating than having your prepaid stolen and easily-used, and more can be done about the former than the latter. I don’t have a credit card so I’m forced to use my debit, and I worry about having to build a credit history, so getting a prepaid would be back-tracking. It might be an effective budgeting tool for younger people, like teenagers who borrow their parents’ cards anyway, to help them become aware of their spending.
8 jerry // Oct 24, 2008 at 4:13 am
I’m with you. I don’t think the benefits are good enough to move away from using regular credit cards occasionally. I have almost no credit card debt and the cards I use, I get points for or cash back. Now, THAT’s good use of credit in my book. And, $5 is $5. I don’t like to pay anything. I like to get money BACK! Your insurance for keeping your money where it should be is in using credit to your advantage. I think this pre-paid debit card business will just lead to a fizzle out…
Jerry
http://www.leads4insurance.com
9 PrepaidWirelessGuy // Oct 24, 2008 at 7:55 pm
There’s definitely some pros and cons depending on your needs. There are so many out there now that you can usually find one that works for your lifestyle and objectives. Fees can be pretty low and compare well to credit cards that offer particular benefits. Check out this page for more info on benefits:
http://www.prepaid-wireless-guide.com/prepaid-debit-cards.html
Cheers,
PrepaidWirelessGuy
10 FBN Roundup- Final Semester Registration Edition : Tight Fisted Miser // Oct 26, 2008 at 12:06 pm
[...] Made of Money asked whether prepaid debit cards are a good idea. I think they’re too expensive and I don’t foresee a situation in which I’d buy [...]
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[...] Not Made of Money wonders whether prepaid debit cards are a good idea. [...]
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[...] At Not Made Of Money, the lowdown on prepaid debit cards. [...]
13 Randy San Nicolas // Nov 2, 2008 at 10:31 am
Prepaid Debit Cards are a useful tool for a struggling individual. I’m in the prepaid business but only use a prepaid card for specific reasons. Check out my blog for some writings on the Prepaid Space.
http://www.prepaidenterprise.com/prepaid_enterprise/2008/10/does-your-fee-schedule-match-your-marketing-message.html
http://www.prepaidenterprise.com/prepaid_enterprise/2008/10/reaching-the-unbanked-and-underbanked-market-with-prepaid-products.html
14 BigJohn // Nov 3, 2008 at 1:15 pm
I have a Prepaid Debit Card that I purchased online with my paypal account. Its from Russell Simmons and its called a Rush Card. its pretty cool and has lots of features.
15 Jim // Nov 8, 2008 at 6:51 pm
If someone is stuck for a bank account or is getting hit with over draft fees all the time I have found a no fee card for those with direct deposit. Its FDIC insured and the only no fee prepaid card I am aware of.
http://www.moneymanagercard.com/pricing.php
16 click4credit // Nov 27, 2008 at 3:49 am
Prepaid credit cards have both advantages and disadvantages but I think that the greatest advantage that prepaid credit cards can offer is the possibility of not going over than what money you have. This saves you from being in debt but with the ease of use that a credit card offers. On the other hand, it is somewhat more expensive to maintain a prepaid credit card. While not all of them charge fees other than for activation, some do charge monthly service fees, withdrawal fees, balance inquiry fees, load fees, and replacement fees.
17 dwilson // Mar 8, 2009 at 5:55 pm
“So, although you won’t have your name on your credit card,”
I think you have been misled.. I have had a number of pre-paid debit cards.. All of them have my name on it, although when you first purchase the card at a convient store or walmart or where ever it is that you purchased it… No it wont have your name, because you have to finish signing up via online or over the phone and then they send you your card with your name, expiration and so forth. They have all your personal information on file. If you are planning on getting one of these cards to protect your identity, the odds are the same as using a normal check card or credit card. Do not buy these cards as a means to protect your identity, only get them if its your only option.. Most of these cards have A LOT of hidden fees. Be sure to read them over before getting any of them.. All access is a good card and so is account now.
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