Prepaid debit cards on the increase
Prepaid cards are becoming increasingly popular but the market needs to be compared first before consumers invest in them.
A new Consumer Reports analysis of prepaid cards has revealed that fees are beginning to come down but consumers need to be aware of these fees before investing in the card.
Traditional debit cards linked to bank checking accounts do offer stronger protection than most prepaid cards.
Prepaid cards are an alternative to credit cards and bank debit cards for consumers that do not qualify or are wary of using credit or debit cards.
There popularity is said to be as a result of the convenience they bring consumers as they can be used to make purchases in stores and online, receive direct deposits, pay bills online and withdraw cash from ATM machines.
Debit and credit cards offer guaranteed protection for when the card is stolen or used in an unauthorised transaction and if the card provider goes out of business.
However, according to an analysis issued, Consumer Reports found prepaid cards do not offer the same protection if the card is lost or stolen. Some prepaid cards may charge a number of fees that are not disclosed at the point of sale.
Some prepaid cards may charge activation or initiation fee and monthly fees. Also, there may be charges for withdrawing cash from a standard ATM.
The report also revealed a minority of prepaid cards charge for sending a paper statement to customers and a fee for customer service. Inactivity may also lead to consumers incurring further fees.
Prepaid cards are popular for consumers that like to budget their finances weekly or monthly, as there is no overdraft or extended credit to tempt consumers into spending money they do not have.
Therefore, before consumers purchase a prepaid card it is important the market is compared to find prepaid cardsthat do not charge an extensive range of fees.