Prepaid credit cards are now the fastest growing segment of the plastic market. Last year some $65 billion in transactions were conducted. Corey Blake from New Horizons Credit Union stopped by Studio10 to discuss the Pros and Cons of Prepaids.
Why are prepaid cards such a growing trend?
Several reasons, we estimate that there may be at least 50 million Americans who are not able to qualify for credit. These consumers are young, or perhaps unbanked. Some use prepaid cards because they can't get a credit card or a checking account. Also, some employers distribute them instead of paychecks.
So what are some of the Pro's of these cards?
For the college student it's a great way to control spending because they can only spend as much as there is on the card. They can use the card most places that the card brand is accepted. There is no approval process for those with no credit history. You can't get into debt. They can also help with limiting spending and staying on budget. There is no interest rate.
So what are the Con's of these cards?
For one thing you only load so much money on the card, so you will need to keep track of the balance. They may not be as convenient on the reloading of funds process. You usually have to go to a retailer or online and if you're traveling that may be an issue. You don't build credit. Some offer less consumer protection. Hotels and Car rentals generally won't accept pre-paid cards. Watch out for all the fees as well (activation and maintenance fees, reloading fees, ATM fees, dormancy fees, etc.)
New Horizons Credit Union
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