Pre-paid debit cards are a life-saver, in many situations… especially those instances when a credit card is required for payment purposes. This includes things like renting a car, booking accommodations and certain online purchases. Here are the pros and cons to using prepaid debit cards.
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Pros of PrePaid Debit Cards
PrePaid Debit Cards Are Easy To Get
Getting started with many popular pre-paid card brands is as easy as purchasing one of them. In most cases, you simply “load” your new card the first time when paying for it at the checkout. No credit check is required and you normally don’t need to go through an approval process either.
PrePaid Debit Cards Can Be Used Online
Much like traditional credit and debit cards, pre-paid cards can be used to pay for (most of) your online purchases. If you’re planning to use a pre-paid card to shop online, it’s best to choose one that’s backed by a major financial service such as Visa, Mastercard or American Express.
PrePaid Debit Cards Keep Spending Under Control
With a pre-paid credit card, you can only spend as much money as you’ve loaded onto it. This way, you avoid racking up charges on your actual credit card for impulse purchases. The extra time that it takes to add more money to your card gives you a few minutes to decide whether or not the product or products you want to buy are things you really need.
Cons of PrePaid Debit Cards
PrePaid Debit Cards Won’t Help Your Credit
Pre-paid debit cards don’t report your payments or purchases to credit bureaus, which means they won’t help to improve your credit score. Unfortunately, without a means to establish a positive payment history such as a using credit card that you pay off every month, it can be extremely difficult to get a low credit score back on the right track.
PrePaid Debit Cards May Come With Fees
Many pre-paid debit cards require you to pay a start-up fee when you initially get the card. Even worse, that might only be the tip of the financial iceberg. Depending on the card provider you choose, you may also find yourself paying fees for things like loading money onto the card, checking your balance and withdrawing money at an ATM.
Pre-paid debit cards are very convenient, especially for those with little or no credit history. One of the most important things to keep in mind, when searching for a card, is to shop around. Don't buy the first card you see. If you do, chance are you'll end up spending a ton of money on fees, which is something you definitely want to avoid.