Something to Consider
Earlier this year I had a couple of occasions where I wished I had a method other than cash or my regular debit card to pay for transactions where I was unsure of the vendor. Though I had heard of prepaid debit cards in passing I had idea where you got one or what the fees were.
I opted to use my debit card for the purchases back then but I also decided that it would be a smart move to learn more about how reloadable credit cards work, and the advantages and disadvantages to the more popular programs out there.
I learned that prepaid debit cards, a.k.a. stored value cards, are pre-funded, reloadable cards. The card user loads funds onto the card through various methods, moneypacks and direct deposit are most common, and is then able to use the card until the funds are depleted. Of course, the user has the option of continually supplying funds to the card and thereby maintaining a positive balance. The cards can be used with atms worldwide, as well as anywhere Visa or MasterCard are accepted. One catch is that there are often fees, sometimes substantial, attached to these cards so it pays to read up in advance and know what you are getting into.
A little in store research established that there are a plethora of options on the register endcaps that I spend so much time ignoring. NetSpend, Greendot, mPower, and Walmart all had at least one card available at our local Walmart. A quick online search added Discover, Amex, Capital One, and Modern Cash to the list of frequently mentioned cards. The fees varied as greatly as the card providers with some charging for everything from activation to reloads and monthly or annual service fees.
Still unsure about everything I kept digging. The Payment Card Center of the Federal Reserve Bank of Philadelphia offered several discussion papers published between 2004 and 2011 covering everything from who distributes these cards to who uses them and why. One 2005 paper found that the cards presented an easier, and often more affordable, option for payroll deposits even for those who have checking accounts. Similarly, a card with free or low cost direct deposit could eliminate hundreds of dollars in check cashing fees each year for those without bank accounts.
Next, I talked to friends and family to see if anyone was using or had used stored value card, and what they thought of them. One neighbor told me that she uses one for paying bills because she doesn’t like using her bank linked debit card online. Her tip was to make sure to get one with no minimum deposit and as few fees as possible. Another friend said that he had attempted to get one for his daughter to use during her summer vacation but the process proved to be too complicated and costly.
What do I think? I think it all depends. The right card, easy to use and low fees, could be useful but it isn’t a decision anyone should make in a hurry. Thankfully, I now have the time and information to help me make a good decision.
Very informative indeed! I love reading useful information article.
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