Prepaid Cards have been around for a long time now, and a lot of people use prepaid cards despite their costs and charges. Prepaid cards have their pros and cons and are targeted at people who find it difficult to open a bank account and need a card to shop online or just avoid carrying cash.
When you buy a prepaid card — you have to load it with your money and then you can use it like you would use a debit card. Most prepaid cards will charge you a fee when you are loading it initially and then other fee like — annual fee, reloading fee etc. Each card differs in their fee and charges so you can compare a few prepaid credit cards and see which one is best for you.
Here is a take on the top pros and cons of prepaid cards.
Benefits of Prepaid Cards
1. Safety: Prepaid cards are a good option for people who are not able to open a bank account and don’t want to carry cash with them all the time.
2. Shop Online: It is impossible to shop online without having a debit or credit card. If you need to shop online and don’t have a debit card, then you can use a prepaid card to do this.
3. Use for Car Rentals, Air tickets and Gas Stations: A lot of people use prepaid cards for getting car rentals, at gas stations or booking airline tickets. There are some places which don’t accept cash and prepaid cards come in handy at such places. However, there are some disadvantages to this, which we will discuss later.
Disadvantages of Prepaid Cards
1. High Fee: If you are using a prepaid card — you will be charged every step of the way. There will be a fee when you load it, then another when you re-load it; it is quite likely that you will be charged if you ever call them up and then there is the annual fee. The high fees of prepaid cards make them the last option for anyone.
2. Does Not Help Build Credit: A lot of people get a prepaid card because they are not able to get credit cards and want to build their credit histories. Prepaid cards don’t help in this at all. They are not means of credit and don’t report to the credit bureaus, so they don’t help you build a credit history in any way.
3. Not all Rentals and Hotels Accept Prepaid Cards: This is a really important point because a lot of people get a prepaid card to rent a car and then find out that it is not accepted at their rental. If you plan to get a prepaid card for renting a car or booking a hotel, then first check with them if they accept any prepaid cards or not. Often, you will find that it’s not easy to rent a car with prepaid cards.
4. Hold Money For Over a Week: The other thing that takes people by surprise is that some gas stations or hotels will put a hold on your prepaid card that lasts over a week. So, if you fill gas worth $20 worth with your prepaid card, some gas stations may even put a hold of $75 on your prepaid card, and you won’t be able to use this money till the hold lasts.
These were some important pros and cons of prepaid cards that you should keep in mind while deciding whether one is right for you or not.
This site has regular features about credit cards, personal finance and other money related articles, if you would like to get that content by email, pleaseÂ click here.Â