Have You Ever Used Prepaid Cards?

A prepaid card is like a cross between credit cards and debit cards. You make an initial deposit to load the card with a specific amount of money and then you reload the card when the balance runs low. Once thought to be a spending tool only for the financially challenged, these cards are becoming an increasingly popular way to make purchases without running up credit card balances or tapping into bank accounts. Prepaid cards have several advantages and disadvantages.


One advantage to these prepaid cards is that consumers don’t have to qualify for a checking account. You also don’t have to undergo a credit check because you can purchase these cards at a number of retail stores.

A prepaid card can help you manage your finances by limiting your spending. You don’t have to worry about going over your budget because you can only spend up to the amount that you’ve already loaded on your card. Having one of these cards can be an easy way to curb impulse shopping habits.

If your prepaid card gets lost or stolen, at least you’ll only lose a limited amount of funds. Prepaid cards also come in handy when you’re making purchases that might otherwise auto-renew, such as magazine subscriptions and membership fees. You can also use these cards for online purchases without having to reveal personal or financial information.


Despite all of those benefits, prepaid cards have their drawbacks as well. Hidden fees often lurk in the fine print. Card companies often charge activation fees, ATM fees and a surcharge for every purchase. Some companies also charge monthly maintenance fees, dormancy fees and inquiry fees. If you add up all of the high fees, a prepaid card might turn out to be one very expensive way to bank.

The prepaid card industry is relatively young, so it isn’t scrutinized like the credit card industry. This means that few regulatory measures are in place to protect you if your card is lost or stolen. Although some prepaid card companies offer customers “zero liability”, most of the companies do not. Unlike credit cards, using a prepaid card doesn’t allow you to build a good credit history. None of your deposit or purchasing activity is reported to any of the credit bureaus.

The money you use to fund your prepaid card isn’t covered with any type of insurance. If the card company declares bankruptcy or shuts its doors, you might be out of pocket for whatever balance remains on your card.

If you decide that the advantages of using a prepaid card outweigh the disadvantages, search around for the card with the lowest fees. Keep track of your balance to make sure there aren’t any surprise fees hidden in the fine print. Sometimes, these hidden fees will eat up any available balance, leaving you with nothing left on your card.


  1. says

    I think, for some, this is a great alternative to a C.C. It certainly keeps them in line. I also think it may be a great idea for kids. Teaches them the value of SWIPING a card. Money doesn’t just grow on trees. Perhaps letting them earn the money through chores while putting it on a prepaid card would help them learn that swiping a card isn’t “free money.” You could show them the balance online and use it as a great learning tool!

  2. Patty says

    I am a student and I don’t have enough income monthly to get a normal credit card so I have to use prepaid cards. Thanks god there are so many options out there.
    I don’t do much shopping online so I don’t need a prepaid credit card – it’s too expensive in the end, there are too many hidden fees and everything is too expensive in the end. Online games and Skype are the only services where I use prepaid cards. I’ve tried a couple and liked Paysafecard best of all. You can get it almost anywhere, you can combine the cards (so you can get rid of your leftovers) and there are no hidden fees.

  3. says

    The only reason I use a credit card in general is to bring up my credit and also because the rebate is awesome. Prepaids don’t do that for you, so I wouldn’t use one, but I can see the benefits for people that don’t qualify for credit cards!

  4. says

    I was short a few thousand miles to hit the One Million Club. With an upcoming family trip with checked bags, it was worth the $1.50 for the $1000 prepaid card. I bought three if I recall correctly, hit the million before flying, saved $100 in bag fees, skipped the long line, and used the cards for a few months of gas and groceries.

  5. says

    When I was first getting back on my feet financially I used a prepaid card. It was a great way for me to learn what I could budget and spend per month. Plus they were low risk which was good as their limit was low. They are a great tool for learning.

Leave a Reply

Your email address will not be published. Required fields are marked *