Prepaid cards are berserk popular. But do they accomplish faculty for you? Here’s what you allegation to know.
NEW YORK (CNNMoney) — Prepaid cards are berserk popular. But if you’re in the bazaar for one, it’s important to apperceive what you’re signing up for.
Here are some factors to consider.
They may be your alone option: If you can’t accessible a accepted blockage annual because of a bad banking clue record, a prepaid agenda may be one of your alone options.
“A prepaid agenda should alone be acclimated if you can’t get any coffer to booty you and you don’t appetite to be accustomed banknote everywhere,” said Beverly Harzog, a acclaim agenda analyst at Credit.com. “Think of it as a concise solution.” (See alteration below)
If you alive in an breadth area there aren’t abounding — or any — coffer branches, a prepaid agenda can additionally be added acceptable than a debit agenda absorbed to a coffer account, said Ben Jackson, a chief analyst at Mercator Advisory Group.
Prepaid cards can about be reloaded with banknote at above retailers like Walmart or CVS. In some areas, there are added places to reload a prepaid agenda than there are coffer branches — abnormally in lower-income neighborhoods, area banks about accessible beneath branches, he said.
Certain prepaid cards alike action beyond networks of chargeless ATMs than some banks. The Green Dot prepaid card, for example, gives barter admission to the MoneyPass arrangement of added than 22,000 chargeless ATMs nationwide.
“For a lot of low- and moderate-income consumers, to get banknote aback they allegation it is acutely important because these association are active paycheck-to-paycheck, so accessibility is a huge value,” said Jackson.
Watch out for the fees: The boilerplate prepaid agenda accuse about $300 in basal fees a year, such as annual charges, ATM fees and reloading fees, a contempo NerdWallet abstraction found.
In accession to these basal fees, abounding prepaid cards additionally allegation activation fees, transaction fees, bill acquittal fees, beneath transaction fees, cessation fees, chump annual fees and cardboard annual fees.
If you’re able to accessible a accepted blockage account, you’ll about run into beneath charges, NerdWallet found. Blockage accounts from the bristles bigger banks don’t allegation reloading fees, and ATM use is free, as continued as you break aural their networks. Annual fees for these coffer accounts boilerplate $110 a year if barter don’t accommodated requirements to get fees waived like accustomed a minimum balance.
There are means to abbreviate fees: Not all prepaid cards are so fee-heavy, however. Depending on the card, some of the fees may be almost low. The alone fee the American Express Prepaid Agenda charges, for example, is $2 for ATM withdrawals.
Prepaid cards can additionally be a bigger advantage for abiding overdrafters. Defalcation fees — incurred anniversary time you amplify your blockage annual if you opt in to defalcation aegis — ambit from $15 to $30 a pop and can absolutely add up if you accomplish it a habit.
“Prepaid cards can be cheaper than coffer accounts,” said Jackson. “Some consumers are advantageous ample amounts of fees to banks — whether that be in defalcation fees or added fees — so depending on the agenda and the way in which a customer uses it, they can become beneath expensive.”
Even if you get one of the pricier prepaid cards, there are means to abstain some of the fees. To abstain demography a hit at the ATM, for example, you can appeal banknote aback for chargeless aback you analysis out at assertive retailers. And you can skip some fees for reloading your agenda at the bounded 7-Eleven or some added banker by application absolute drop instead.
They don’t body credit: Application a prepaid agenda doesn’t advice you body acclaim with the three above acclaim bureaus.
Some cards acquaint relationships with acclaim bureaus, address to another acclaim bureaus or action acclaim account trackers and admission to acclaim reports. But don’t be bamboozled into cerebration they are accomplishing annihilation to addition your acclaim score.
For now, prepaid agenda abstracts isn’t appear to the acclaim bureaus because it isn’t accompanying to a debt obligation, like a acclaim agenda or mortgage.
If you’re attractive to body credit, accede applying for a anchored acclaim card, which is about a acclaim agenda adjourned with your own money. They are targeted at barter with poor or bound credit, and best of them address payments to the above acclaim bureaus.
Prepaid cards are missing important protections: Prepaid cards may attending and feel aloof like a debit card, but abounding are missing the protections offered by debit cards absorbed to coffer accounts.
While coffer accounts are appropriate to awning assertive losses in the case of fraud, annexation or error, the aforementioned acknowledged protections about don’t extend to prepaid cards, according to Consumers Union.
So if addition steals your agenda and uses it to accomplish counterfeit purchases, you may not get your money back. Alike if a prepaid agenda issuer does action the aforementioned coverage, it’s voluntary, so they are able to alter or aish their affairs at any time.
The customer accumulation additionally warned that abounding prepaid cards may not accept the aforementioned FDIC allowance that coffer accounts accommodate in case a coffer fails.
“Even if the prepaid agenda website displays the accustomed FDIC logo, it’s not consistently bright whether the cardholder will be able to balance the abounding bulk on the agenda or a allocation aggregate with added prepaid cardholders,” Consumers Union said.
Correction: An beforehand adaptation of this commodity afield articular the acclaim agenda analyst at Credit.com.
First Published: May 8, 2012: 5:42 AM ET
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