There has been an increased growth in the use of general purpose reloadable prepaid cards and this has been attributed to by the fact that these cards can be used to make purchases conveniently. They can also be used to withdraw money from ATMs and also the card holders can pay their bills using these cards. You can buy the cards online or from a store. With these cards, you can add cash whenever you want and use that money in buying from retail stores or withdraw it from automated teller machines.
The prepaid debit cards serve as bank debit cards but without a checking account. You do not need to have a checking account with a bank in order to enjoy the services offered by these cards though some prepaid cards today offer online bill pay and also savings accounts. In 2009, American consumers loaded closed to $28.6 billion on to their prepaid cards and this is according to Mercator Advisory Group.
This is pretty a large amount of money and signifies the scale of use of these cards, which otherwise have been criticized by many consumer groups for holding hidden fees for their customers. It is even expected that the consumers using prepaid cards will load an estimated $200 by the end of 2019. This shows that the use of these cards will continue to rise.
From a research conducted by Pew Charitable Trusts, it has revealed interesting aspects about the use of prepaid debit cards. The Pew researchers has revealed that prepaid cards have many service fees imposed and they range from somewhere between 7 to 15 different fees. The most common of these fees are monthly maintenance fees, card acquisition or activation fee, ATM withdrawal and customer service calls.
Though these fees seem small amounts, they can add up to huge sums of money in the long run. According to the Pew research, most consumers use prepaid cards as a way of keeping their spending minimal. The fact that many of these cards do not offer overdraft services means that consumers only have to spend what is in their card.
Besides keeping the spending within the card holders’ means, it also averts them from incurring overdraft fees. In addition, prepaid cards can also cost less than checking accounts though they come with some risks. The issuance of the cards is not covered by the laws that require disclosure of terms and fees.
They are also not covered by the laws that limit consumer liability for unauthorized electronic money transfers and this puts the card holders into money risks. However, despite these risks posed by the cards, they can be essential financial tools for a particular group of people. They can be a good option for those people who do not want a bank account or are limited by some other aspect to get a bank account.
The cards are also useful for parents who would like give their kids money without giving hard cash or accessing their bank accounts. If you take overdraft facilities frequently, you are also in a better position to gain positively by using these cards since they will make you manage your spending. They will also avert you the small but recurring fees that you have to pay every time you take an overdraft. However, if you do not pay overdraft fees then your checking account could still be much better than a prepaid card.