There are hundreds of Americans that every single year decide to give their accounts up and put their money into prepaid debit cards. Although most believe this is the best way to control how much they spend it is not. There are some shady details regarding prepaid debit cards that should be carefully taken into consideration. Of course these cards include some benefits, such as:
- Allows users to better control how much they spend on a day to day basis
- No overdrafts, which means no overspending your money
- Some are international: Visa and MasterCard, which means you will be able to travel and use your card while doing so
Although these are some very good advantages there are several bad sides as well. The risks of prepaid debit cards go much further than having to pay fees to reload the card. What if the card bank simply disappears? What safety guarantees will the card holder have? None. Apart from that there is no liability protection. If you actually analyze the prepaid cards you will see that they have as many risks as they have advantages.
The real deal when it comes to prepaid debit cards.
Well, these cards actually do not help people save money. Most of the times people end up spending more money because of service fees, recharging fees and other values requested by the card company. Most of the times a checking’s account would not have the user pay these many fees. It is also important to keep in mind that it is always important to learn how to deal with the money and how to save and administrate your finances. For example, if a user sticks to prepaid cards the probability of the person to learn how to deal with his finances is much lower than it should be. Prepaid cards end up being a way for people to never learn how to better manage their money.
Other risks of prepaid debit cards are that users will have to visit the bank often, which means there will be more temptation to spend more. It is basically impossible for users to have automatic monthly payments set on such cards. Users this way would have to visit the bank and pay their bills there on a monthly basis. This means extra expenses with gas, or even bus fares. This is also not very safe since the user would have to withdraw money and perhaps end up having to pay extra fees to withdraw as well.
Another risk of prepaid debit cards is that they do not offer users the possibility to check their statements, which means you might think you have money when you do not have. It is never good to rely on these cards too much, after all your memory might fail. There are some companies that provide these services that are trying to offer extra services for the clients. In fact some are even breaking the main purpose of this type of card by offer overdraft options and loans. This is a bad thing because people might end up doing exactly what they do not want to do: overspend. These card were meant to be used while there is credit on them and not work as an average card.
Who should use these prepaid cards after all?
Of course these cards are not a bad idea for certain people. Although Risks of Prepaid Debit Cards exist, these prepaid cards are still a very good option for some people, such as:
- Students who do not have a lot of money to take care of.
- People who do not deal with money on a weekly basis and that would not like to bear the costs of a checking’s account.
- Parents that would like to give allowances for their children in a safe way.
In fact they can be a great option, but it is always a great idea to always know the details about the cards as well as read their contracts carefully. Also try to know as much as possible about the fees charged and whenever possible check if this is what you truly need. There are several different companies in the market today and they are always offering great plans and coverage. All users truly need to do is look for the service that best fits their needs and analyze them carefully.
Another important thing to keep in mind is that your prepaid card is a real account, so if you no longer wish to make use of it cancel it. Most of the prepaid companies charge fees even while the user does not have any active balance on the card. By doing so you will not only get rid of any possible expenses in the future but you will also be able to deal with your finances in a better way.