The popularity of prepaid debit cards has been rising in the last several years. You can qualify for a prepaid debit card regardless of your credit history. Since prepaid debit cards are co-branded with MasterCard or Visa, you can use these cards to pay bills almost anywhere regular credit card payments are accepted. Many people use these cards overseas for convenience.
Whether prepaid cards are good or bad for you really depend on how you use them and how responsible you are. Prepaid debit cards make sense for some people who are trying to control their spending because they can’t spend more money than what is loaded on their card. This way you wouldn’t carry a credit balance, have any overdraft fees to pay, or be in debt. Thus, if you think you have trouble handing credit, a prepaid debit card may be an option you want to consider.
Prepaid debit cards also have a plethora of fees, including reload, account maintenance, and activation fees. Despite these fees, some people still find it better to use a prepaid debit card as opposed to a regular credit card. This is because if you are bad in handling credit, these fees may be lower than the amount of interest you would have to pay with a credit card if you carry a balance at the end of the month. However, in recent years, some card companies started offering prepaid debit cards with significantly fewer and lower fees. Some cards will even waive certain fees if you set up direct deposit. Make sure you understand what all the fees are before signing for any card. As with any financial product, it is important to shop around before you make any decision. Compare the fees and features of different prepaid cards to ensure that you get the card that is best suited for you.
Do prepaid debit cards build credit?
Using prepaid debit cards will have no impact on your credit score and you will not be able to build a credit history. This is because when you use a prepaid debit card, you are not borrowing or repaying money, and thus, the major credit bureaus often do not look at your prepaid debit card behavior when determining your credit score. For someone who is trying to increase their credit score, consider applying to a prepaid credit card as opposed to a prepaid debit card.
Who uses prepaid debit cards?
You might sign up for a prepaid debit card if your bank doesn’t carry MasterCard or Visa branded cards. Parents can also load money onto the card for their children to teach them good money management skills. College students may also find that using prepaid debit cards is convenient in terms of helping them easily pay for books, food, and other expenses.