In the recent past the use of prepaid cards has risen significantly. According to Federal Reserve, these cards were used to make $65 billion worth of transactions in 2010, up 35% from the previous year 2009. This rise can be attributed to a number of things: the growing number of the ‘unbanked’ population, a messed up credit that resulted to very high interest rates, and the fear of identity theft.
Knowing the pros and the cons of this type of payment method can help you decide if this is a route that you would want take.
- There is no approval process
- You don’t have to have a credit history
- You can’t get into debt because you are putting your own money on these cards. When it’s gone, it’s gone
- It helps with budgeting
- No interest accrued on these cards
- You don’t build credit
- The cards are not accepted everywhere you want to shop
- While these cards do not have interest accruing, there are higher fees associated with them.
These are some of the fees that you might expect
- Activation Fee
- Monthly Fee
- Cash Withdrawal Fee
- Balance Inquiry Fee
- Customer Service
- Non-use Fee
These fees will vary across the board, and so you have to read and understand the fine prints or you will be cursing the day you signed in.