The use of prepaid cards has been a growing trend for bank consumers everywhere. It is a convenient and easy tool for shopping, paying the bills, and other things that can also be done with a debit or credit card.
Prepaid cards work the same way as debit and credit cards with the exception that they are not linked to a bank account. You need to load money to the card and the amount that you can spend will be deducted from the balance. When the balance goes to zero, you will have to reload money again.
Before you choose what prepaid card to use, you need to know the advantages and disadvantages of the prepaid card.
Prepaid debit card advantages
With the increase of prepaid card usage, it only shows that a lot of people are choosing this option as an optional mode of payment. But what makes people use prepaid cards?
- No credit checks. People with poor or bad credit history can avail of a prepaid card as an alternative to opening a new bank account.
- Widely accepted. Prepaid cards are accepted everywhere credit and debit cards can be used especially if associated with card networks such as Visa, Mastercard, American Express, or Discovery.
- Good as cash. You can only spend what you have in your account and are less likely to fall into debt as opposed to using credit and debit cards.
- Safe from identity theft. Personal information is not linked to most prepaid cards so any sensitive details cannot be stolen.
- Can be used as a budgeting aid. Since you can only spend what’s available on a prepaid card, you will learn how to budget your money and be wise in managing your finances.
Prepaid debit card disadvantages
While prepaid cards seem to be a good option, they also have their own downsides. Here are some disadvantages that you might want to weigh before making a decision:
- Banking fees. While prepaid cards have lesser and cheaper fees than debit and credit cards, they still have some fees that might be hard for some people.
- Lacks security. Security features might differ from one prepaid card to another so always read more about the features of different prepaid cards.
- No credit building. People with a poor credit history will not be able to rebuild their credit scores despite being more likely to comply with the prepaid account requirements.
- It does not accrue interest. Since prepaid cards are not bank accounts, the money on loaded on them will not accrue interest. Although there are some prepaid cards with an optional savings account feature.
Bluebird Prepaid Card
To better understand the pros and cons of a prepaid card, let us take Bluebird prepaid card as an example. Bluebird is one of the popular prepaid cards on the market. It has no monthly fees unlike the others and has other features such as:
- Direct deposit
- Free withdrawal fees at MoneyPass ATMs
- Free top-ups at Walmart, via debit card, and Mobile Check Capture
- Bill pay
- Money transfer to another Bluebird account
- Personal financial management tools such as Family and SetAside Accounts
- American Express membership benefits (Purchase Protection, Fraud Protection, Roadside Assistance, and 24/7 hotline)
Bluebird is a good prepaid card option but it also has some significant disadvantages. First, it still has fees such as withdrawal from non-MoneyPass ATMs, money transfers to non-Bluebird account holders, and adding funds from participating retail locations other than Walmart. Second, American Express has a lesser reach as compared to Visa and Mastercard. Technically, Bluebird is one of the better options for prepaid cards out there especially with its features, but what if there’s a better alternative?
Chime Debit Card is an online banking account that has similar features to Bluebird except it is completely free. You get to enjoy the benefits of having an actual checking account without worrying about outrageous banking fees. It even has an Automatic Savings feature which allows you to set aside money automatically from direct deposits. If you want to have a bank account without fear of falling into debt, consider Chime Debit Card as an option. Read more about Chime and its features by visiting its website: https://chime.com