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.-
