Advantages and Disadvantages of Prepaid Debit Cards

Credit cards have been replacing cash transactions for quite some time now, as there is no need to carry several wads of cash to a distant place, and one is safe from the risks of robbery or misplacing the cash. However, having numerous credit cards can be risky too – one of them might get misplaced, resulting in swindled cash from your bank account. Misplacement or irresponsible use of credit cards can leave you knee-deep in debt too, which is even a worse scenario. Being caught in a vicious cycle of debt and expenditures is not the ideal way for one to survive in a troubled economy. What is more, credit cards cannot be used everywhere – certain countries and banks do not allow them, and you might be left stranded in an unknown place with no access to funds.

A Prepaid debit card is an easy solution to keep oneself safe from such risks. You can load the desired amount of money in the card, and use it in the same way as the other plastic cards, with one significant difference – you use just what you load, and no more! The advantages and disadvantages of a prepaid debit card are listed herein, offering a better insight:

Advantages:

Controlled expenditure – prepaid debit cards can be used only for the amount that is loaded into these, and the expenditure limit is pre-defined. Over spending is not a possibility, and hence one ends up saving more.

Easy tracking of expenditure – one does not realize his or her spending limits with a credit card. However, a prepaid card lets one keep a steady track of their expenditures, and keep a tab on the same beyond the convenient limit.

Safety – One does not need to carry thick wads of cash while travelling if they have a prepaid visa debit card. The fraud protection policy for a credit card is applicable here as well, if the fraud is reported immediately.

Creditworthiness – Prepaid debit cards requite no credit check, and those with a low credit rating would have no difficulty in obtaining them.

Disadvantages:

Hidden fee and charges – Prepaid debit cards from certain companies involve a significant processing charge quotient which might eat away into the amount you can actually spend. Opting for one of the low fee prepaid debit cards helps, as the various charges levied in the form of ‘inactivity fee’, ‘ATM withdrawal fee’, ‘Application fee’ etc. can be avoided.

Lower degree of fraud protection – Several jurisdictions tend to ignore the fraud pleas for prepaid debit cards and process fraud protection claims related to credit cards with more attention.

Threat from PIN skimming devices – Safety levels are dubious in certain countries as theft of the users’ PIN codes is easier for prepaid cards when compared to that in credit cards.
Overdraft fee – Many prepaid card users are not aware that overspending might attract an ‘overdraft fee’ if the amount spent does not show in the available balance.


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