Prepaid debit card fees and facts

by Manshu on October 14, 2009

in Credit

Last week I wrote about two factors that influence people to opt for a prepaid debit card. I also wrote about pros and cons of prepaid debit cards a few months ago. In this post I am going to list out a few additional things that you should be aware of while using such a card (which weren’t covered earlier).

Negative Balance Fees: Although prepaid debit cards don’t allow you to overdraw, in some rare transactions like a restaurant bill or rental car, you may be overdrawn. In such cases, you will be charged a negative balance fee.

Decline Charges: In most cases your transaction will be declined if you try to overdraw your prepaid debit card. However, when this happens, some cards may charge you a decline fee. So, even though you can’t overdraw your account, you can still end up being penalized if you try and charge your card for more than the available balance.

Daily Limits: Some cards impose a daily limit on how much you can spend. So your card may be declined, even if you have money in your account.

Use cash back instead of an ATM: You will be charged a fee every time you withdraw cash from an ATM. Instead of using an ATM, you can shop at a store, and get cash back. This will save you some fee that you might have incurred when withdrawing from the ATM.

Direct deposit should be free: A lot of prepaid debit cards act as direct deposit cards and the service is free. There are several ways in which you can load your card, and a lot of these like funding from a bank account will have a fee. However, a lot of prepaid debit cards do allow you to use direct deposit without incurring any fees.

Hold at gas pump, restaurants, car rentals and hotel bookings: Sometimes, prepaid debit card holders find that in the case of gas stations, restaurants, car rentals and hotel bookings — a hold has been put on their prepaid debit card for more than their purchase. So, you may have just filled up gas for $20, but there may be a hold on your card for $75.

Prepaid cards may also require a minimum balance to allow you to conduct a transaction. For example, if your card had only $50, and the minimum balance required to transact on a gas station was $75 – you will be declined a transaction at the gas station.

This was a list of disadvantages, but there are benefits of using a prepaid debit card too, and a lot of people do use them every day. The key is to be aware of the fees and features of such cards, and then use them to your advantage.

{ 2 comments… read them below or add one }

Super Saver October 14, 2009 at 11:54 am

I’m not impressed with pre-paid debit cards. To me, it’s like paying to use one’s own money 🙁

By the way, congratulation. In the new Technorati rankings, One Mint is ranked #28 among Finance blogs and #63 among Business blogs.

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Manshu October 14, 2009 at 4:04 pm

Thanks! I didn’t know about this. Just checked it out.

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