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 werenâ€™t covered earlier).
Negative Balance Fees: Although prepaid debit cards donâ€™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 canâ€™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 â€“ 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.