There are lots of prepaid credit cards for customers to choose from. Much of the choice is in what the cardholder wants to do with the card. Finally, one should actually consider the cost to use the card with loading, transaction, and live customer service fees.
Prepaid Credit Cards Unleashed
With the new bankruptcy laws in place, people are trying to find new methods
of having credit cards without the bill at the end of the month. Not all prepaid
cards are the same, so the consumer should be fully aware of the terms that
each prepaid card comes with.
Definitions
Gift Card: This is a
card for a specific amount for a specific location, like Wal-Mart. Some
banks, retailers, and websites offer gift cards with the Visa, MasterCard
or American Express logo on them. They are for a specific amount, specific
person and usually cannot be replenished.
Prepaid Card: This is
a card where the consumer puts a certain amount on a card carrying the
Visa or MasterCard logo on them. They can be used anywhere that those
cards are accepted. The cards are to a specific person, but are replenish
able.
Secured Card: A Credit
company who considers a person a risk will require them to put a certain
amount in a savings account at their bank. The amount of the deposit is
the amount of the credit line.
Unsecured Card: This
is the standard credit card offered after a credit check and other
verification.
Comparing Prepaid Credit Card Providers
Western Union:
A cardholder can sign up online for the card with a MasterCard logo, and
then take their card fee of $19 to a local western union. When the fee has
been paid the card is sent. It is personalized, with no transaction fees.
Loading is $3.95 with a minimum of $30 and a max of $950. WU has one of
the highest load limits of a $950 load, with a $9,500 monthly max. Other
fees range from cash withdrawal to overdraft. There is a monthly $4.95
maintenance fee.
Rush Card: Russell
Simmons is the spearhead behind this debit card. The target audience is
the black minority in urban areas. The card carries the Visa logo, and a
$19.95 card activation fee. All purchases are charged a $1 transaction
fee. Cardholders are charged $3 for ATM withdrawals, and $10 to replace a
lost or stolen card. The good feature of this card is that the card is
issued, and then you can decide if you want to activate the card. You are
only charged a maintenance fee if the account is not used for a long
while.
Visa Buxx: This is the
card that is being targeted to parents of teenagers. It is direct from
Visa. The fees vary according to which bank or service the parents choose.
The average was $10 sign up fee. The parent must tie a credit card or bank
account for easy reloading of the account. Parents have to have a separate
account for each person they want to have a card. There are no transaction
fees even for loading by bank account or ATM withdrawals. There is a $2.50
fee if a credit card is used to reload. There is a $2 fee is the account
becomes inactive. They do seem to charge for customer service calls. The
preferred method for this company is by Internet.
Greendotonline.com:
this company carries both the MasterCard and Visa logo on a variety of
products available around the country in retail stores. The card’s
available for $10, at local retailers, such as Walgreen’s. To reload the
card, it cost $4.95 at the store. Cardholders are charged $4.95 per month
for maintenance. For variety, they do offer the most, but they do want
everything handled online. Any calls to customer service are charged a fee
by the minute.
Where to purchase Prepaid Cards
Prepaid cards can be purchased anywhere from malls to the local gas station.
Typically, the cardholder will buy a card; take to the counter to be loaded with
the amount the person wants to have on the account. Usually the credit cards
will require a minimum of $20, which includes the card fees.
After the card is set up at the store, the company will send a hard card
with the account name and number, which will be needed in order to make in
person purchases.
Benefits of a Prepaid Card
The main benefit of a prepaid card is no bill at the end of the month. If
there is no money on the card, then the charge will not be approved.
For people with no credit or bad credit, the prepaid card allows a user to
have a credit card without a credit check.
Many of the targeted audience are poor minorities who do not believe in
banks, so most of the cards allow direct deposit, so the user will not have to
pay check-cashing fees.
Another benefit is the ability of the cardholder to rent vehicles, make
purchases online, and make cash withdrawals.
Drawbacks to Prepaid Cards
The main drawback to prepaid cards is that they do not help people establish
or rebuild credit. Though some card providers will offer this service, most of
the time a fee is involved for them to put your history with the major credit
check companies.
A huge issue with prepaid cards is that some come with the term “Debit” on
it. Most rental places require at least a secured card, so if this is the
motivation for the card, then you might want to look into other possibilities,
such as the secured card.
The fees associated with some of the prepaid companies can be staggering.
For example, Rush Card charges a $1 per transaction, until it reaches $10.00.
If the fees are over $10 then the excess charges are returned to the account
the following month.
Loading fees can be enormous if the company only uses Western
Union or some other pay program. A minimum load fee will be $4.95.
Just getting started with some prepaid companies can be costly. The average
price seems to be $19.95.
The final fee is usually for customer service by phone. The above companies
prefer that everything be done by Internet.
Other Credit Card Options
Malls around the country are getting on the American Express bandwagon. They
offer a Gift Card that can only be used for the amount of the card. For
example, if a $250 card is purchased, then when that amount is gone, the card
becomes obsolete. AE offers the cards in values of $25 to $500. The good part
is there are no fees to purchase or use. They can come personalized or
standard. Replacement can also happen, unlike most gift cards. For a gift this
is a great card, but not one for regular day to day use.
Do the Math
Prepaid are great for the person who wants to keep their budget in line or
who has bad credit. They are convenient for shopping, address verification, and
other uses, but they do not help a person establish credit. Fees associated
with the cards can be unreasonable, especially customer service calls.
The most reasonable seems to be the card offered by Western Union,
while Greendotonline seems to have too many fees for standard card usage.
Rushcard is harsh with the $1 fees, but they do give it back, so they have a
plus. Visa Buxx is a good tool if a parent wants to teach their teen about
using credit cards without running up debt. They had reasonable fees associated
with the card. All the cards were attached to reputable banks, which should be
a criterion in selecting a card.
There are lots of prepaid credit cards for customers to choose from. Much of
the choice is in what the cardholder wants to do with the card. Finally, one
should actually consider the cost to use the card with loading, transaction,
and live customer service fees.