Everyone wants to think that there are alternative paying methods these days, but not everyone is aware of some of the dangers that a few of them present. For years, people have given prepaid gift cards and certificates to friends and loved ones, but with the popularity of prepaid debit cards becoming news, is it worth it? Experts say that it’s really not, as the cards present quite the problem for users who think they’re beating the banking system by skipping fees or debt.
While the concept of a prepaid debit card might seem like a good idea, with users able to reload the piece of plastic anytime, anywhere, it’s really not that simple. The reloadable nature of the prepaid card makes these act as a substitute checking account, with consumers using the pseudo account to help budget themselves and be more responsible with their amount of spending.
And while the appeal of having one is also the simplicity, making users feel safe for not dipping into a credit card that gathers both interest and debt, there are some catches. The most obvious comes from the fact that prepaid cards don’t currently follow federal disclosure regulations, giving the companies that run them opportunity to hide what real charges are occurring.
For instance, NetSpend—one of the largest prepaid card companies—gives cardholders an optional “overdraft protection” feature that allows users to overspend three times a month—incurring a $15 fee each time. The most glaring weakness of this entire system is that the lending companies are still all about a bottom line, trying to make a profit as best as they can—much like debt help companies seeking to pay of a person’s debt with an inflated interest rate.
For those reasons, I’d suggest sticking to an old fashioned checking account and putting together a budget for yourself, rather than rely on the help of a prepaid card.
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