I’m Thinking about Changing My Credit Card for a Prepaid Card

June 21st, 2011

We went to the mall this morning and I spent and spent
It’s that time of the month; the time when I can see the balance in my bank account and the number of days left to payday with one eye. I then understand that there is more money than days, if you get my drift. So I release my grip on the bank balance and spend. Oh foolish me! I bought an unneeded latte coffee mixer. We don’t need it, although it’s nice to have, especially now that summer’s here and iced coffee is the stuff to drink on these hot and humid days.

Prepaid cards
I may have found a solution to my bad spending habit, a prepaid card. Prepaid cards are re-loadable cards that can be used anywhere credit or debit cards are accepted. They’re popular with people who can’t afford a traditional bank account, or who have been turned off by overdraft fees and other costs. They also offer a way for consumers who don’t have credit cards to shop online. As for me, I will load the card well before payday and promise myself that when the card is empty I will stop spending.

Prepaid vs. debit
More than 17 million Americans don’t have bank accounts, and that number could grow as checking accounts become more expensive. The broad financial reform bill Congress enacted last year requires the Federal Reserve to place “reasonable” limits on the fees banks charge retailers every time a consumer swipes a debit card. That rule is scheduled to take effect July 21. To make up for the loss of billions of dollars in swipe fee revenue, many banks and credit unions are adding fees for services that used to be free.

Less expensive alternative
Prepaid cards offer “unbanked” consumers a safer and less expensive alternative to check-cashing stores and pawnshops, prepaid card issuers say. Many prepaid issuers allow card holders to have their paychecks direct-deposited to their cards. Card holders can also use the cards to pay bills.

Warning
Prepaid cards have plenty of detractors. Consumer groups say many of the cards are loaded with activation, reloading, maintenance and other fees that can quickly erode the card balance. In May, Florida Attorney General Pam Bondi announced that she was investigating five large prepaid card companies for possible unfair and deceptive practices.

American Express prepaid cards
American Express are the latest group to get into the prepaid card business and they offer the following:

Reloading fees
To add cash to your American Express card, you’ll need a Green Dot MoneyPak, which you buy for $4.95 at a retail or drug store, then reload your card online or by phone.

Withdrawal costs
American Express prepaid card holders get one free ATM withdrawal a month; after that, they’re charged $2 for every withdrawal.

Consumer protections
Federal law protects you from liability if someone steals your credit or debit card and embarks on a spending spree. Those protections don’t apply to prepaid cards. While most prepaid card issuers, including American Express, provide “zero liability,” that protection is voluntary.

Limited use
American Express says its prepaid card can be used anywhere that accepts American Express. Trouble is, a lot of small retailers don’t accept American Express because it has higher transaction fees than other card issuers.

This entry was posted on Tuesday, June 21st, 2011 at 7:18 am and is filed under Credit Cards, Economy, Finance, Money, Personal / Internet. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

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