What You Didn't Know About Prepaid Cards

Prepaid debit cards are still a relatively new option in the industry and many people remain unaware of the cards and how they work. While they do operate much like normal credit cards for the consumer, there are many things that you might not be aware of. Prepaid cards have several great features that may be more fitting for many people that currently use other money management options.

One thing that is different about prepaid cards is that they act as an alternative to a bank account. Instead of depositing money into a bank, it is deposited onto a card. From here you can still use the same features as a bank account including direct deposit, online statements, money transfers, ATMs, and even savings accounts.

Many people are under the impression that prepaid cards are similar to gift cards, and not meant for everyday money managing purposes. However, these cards are most often used in the same way that a traditional credit card would be. They are ideal for anyone who does not qualify for a credit card because of bad credit, or someone who simply wishes to avoid debt and the risks associated with credit cards.

Another common misconception about prepaid cards is that they are not necessary if you already have credit cards and/or a bank account. But what makes them advantageous is the added security. Prepaid cards can be used for online shopping, much like any other credit card. But in the event that a card number is stolen, a prepaid card will protect you from the damages because only the amount loaded on the card can be spent, whereas with a credit card there is potential for funds up to your credit limit to be spent. Also, there are no high bills to pay or overdraft fees to worry about, and the money in your prepaid card account is FDIC insured. For these reasons, prepaid cards have become the best option for keeping your money safe.

As the prepaid card industry continues to grow, people’s misconceptions about them are beginning to diminish, and new users are finding themselves pleasantly surprised at the ease of use of these cards. They are beginning to understand how useful they are for every person, regardless of their needs or their financial situation.

Michael is currently a 4th year accounting student at the University of Texas at Austin. He is particularly interested in business finance and debt. Additionally, he is writing his thesis on prepaid debit cards and prepaid credit cards for teens, distinguishing how young people learn the importance of handling their money only by hands on experience.