Prepaid credit cards are one of the fastest growing payment methods in the U.S. Between 2007 and 2009 prepaid card issuers saw a 21.5% increase in revenues generated from the cards. The bulk of their business comes from those who do not have a bank account. A 2009 study found that nearly one in five Americans chose to live without a bank account and that number is on the rise.
A lot of prepaid card customers see the cards as a way to seek refuge from rising bank fees. Prepaid cards can be used in much the same way as a bank-issued debit card and some companies are even willing to direct deposit employees using the cards which makes them convenient but what most people don’t realize is that unlike banks or traditional credit cards, prepaid cards do not offer certain protections to their customers and they do nothing to help a consumer’s credit score.
Consumer advocate groups have increasingly begun raising concerns about the use of prepaid credit cards and are demanding more oversight for prepaid card issuers. One of the biggest issues they have with prepaid cards is the fact that each card provider has a different fee structure so it’s difficult to figure out how much consumers need to pay in order to load and use their card. Last month the Florida Attorney General's office began investigating the industry after consumers complained about hidden fees, the company involved insists that they disclosed the information saying that the information was located in the fine print.
It is very important to be familiar with a card issuer before you decide on prepaid card. While funds added to a card are FDIC insured cards, they are not necessarily protected from fraudulent charges in the same way that a traditional card is since the federal law that limits a customer’s losses to $50 does not apply to them. While some card issuers like American Express guarantee that cardholders won't pay anything toward fraudulent charges, other customers with other companies like Green Dot could lose up to $500, depending on how quickly the loss is reported.
While there are many advantages and disadvantages to prepaid cards, we here at Credit Cards Professor feel that the most important thing is that you are knowledgeable about all of your options and choose your card wisely. That’s why we provide you with details on a wide range of cards so you can find exactly what you’re looking for.
As always, stay tuned to Credit Cards Professor for more news and updates.
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