Prepaid Debit Cards & ndash; Advantages and Disadvantages

For many years now, plastic has taken the place of cash in our wallets for the majority of our transactions. This move away from carrying our assets in our pockets has meant more people are safe from the worry of being robbed or of losing the money on a bus. However, too many credit and debit cards are not a good thing either, as it makes it too easy to misplace a card and open yourself up to the possibilities of money being taken from your account.

Despite the proliferation of credit and debit cards, some types are still not accepted everywhere. Visa, MasterCard and to some extent Amex are accepted in most places, but other variants such as Cirrus, Maestro and Electron may be turned down in certain shops or if trying to use the card abroad.

Using a prepaid debit card can be an elegant solution to many of these problems, as well as a valuable tool for budgeting your cash. These cards can be used to load up with cash, and then used in shops and online in just the same way as a debit card, but with one big difference – you can only spend what you put on there. Here are some of the main advantages and disadvantages of pre paid debit cards to help you decide if they are for you.

Advantages of Using Pre Paid Cards

Control your budget: Pre load the debit card with the amount you want to spend in that shopping trip or on that holiday. This means you will only be able to spend what you have set yourself and no more.

Safety: By using a pre paid debit card, if the card is lost or stolen you wont be exposing yourself to thousands in available credit being in the hands of an unscrupulous person as you would with your main credit card.

Access to major card brands: If you have poor credit history or for some other reason are unable to access major brands such as Visa, a pre paid card will allow you access to all the services and advantages of using a worldwide card, but without the stringent credit checks that come with other cards.

Disadvantages of Using Pre Paid Cards

Less protection: Credit card companies usually focus on protecting their credit customers to a greater degree than they would their pre payment customers. This means that fraud reports from a pre paid card may not receive as much attention as a fraud report on one of their credit cards, but because your exposure to risk is that much less hopefully it wouldn’t be so much of an issue.

Fees and charges: Check the terms and conditions of your prepaid card provider carefully, as they often levy charges to cover their costs. This could be a cost at the point of application, a monthly administrative cost or an inactivity fee if you don’t top up or use the card for some time.

Overdraft: You would think that, like mobile phones on pay as you go, if the card has no credit on it, it just wont work. Unfortunately in many cases the card will allow the transaction to go through, but will trigger a series of ‘overdraft charges’, so be careful to know exactly what the available balance on your card is at all times.