What exactly are prepaid debit cards? A prepaid debit card (not prepaid credit card) is an alternative to using cash for your day-to-day transactions.
These cards function exactly like a regular credit or debit card, except that they are not tied to any specific bank or checking account.
While the autonomy from big banks may seem appealing, there are a few myths that need to be debunked before you decide to sign up for your own prepaid debit card.
Myth #1 – No Hidden Fees
Many people believe that prepaid debit cards are a great way to avoid pesky bank fees, but that isn’t always the case. While prepaid cards help chronic over-spenders avoid overdraft fees, the price for using the card is more expensive than the price for using a traditional debit card.
In fact, some prepaid debit cards charge you every time you make a deposit or a withdrawal, and that doesn’t even account for the monthly maintenance fee which you’ll have to pay for the convenience of using a prepaid card.
It may not seem like much, these little fees can add up over time, and may leave you wondering why you started using the prepaid card in the first place.
Myth #2 – Safer Than Other Forms of Payment
Banks and credit card companies provide protection to customers who are the victims of theft resulting from fraud. This means that if someone else uses your credit card, you’ll likely have an opportunity to get your money back.
Typically, banks and credit card companies both provide this type of protection, but that service is not usually available with prepaid debit cards. On the contrary, if your prepaid card is stolen and used, it’s likely that you will not be able to get any of the money back.
And even in those rare cases where prepaid cards do offer some kind of fraud protection coverage, it’s often voluntary – meaning that the prepaid debit card company can revise or rescind their coverage at any time.
Myth #3 – Improve Your Credit Score
This may be the biggest misconception of them all!
Some prepaid debit cards do have relationships with credit bureaus, where they offer access to credit score trackers, or credit reports, but using a prepaid card will do nothing to improve your credit score.
Because prepaid cards have no debt obligation, none of the data related to using them will impact your score in any way.
If you’re looking to improve your credit, the first step should be to find ways to reduce your spending, which will allow you to start paying down whatever debt you may currently have.
When prepaid debit cards are a good option?
Prepaid debit cards are typically appropriate as a short-term financial solution, or for people with serious spending problems, but that’s about it.
If you’re traveling, it may be wiser to carry a prepaid debit card than a travelers check or a wallet filled with cash, because it reduces the risk of losing lots of money all at once, but with fraud protection built into credit card and traditional debit cards, it’s not really all that necessary.
Prepaid cards should not be seen as a long-term option for your cash-handling needs either, and are definitely not necessary for people with poor credit scores.
If you’ve got bad credit, and need some financial assistance, the good news is that you do have other options. For details, check out our guide to bad credit personal loans.
Car Capital Financial
Just because you have bad credit doesn’t mean that a pre-paid debit card will be the best solution for your financial needs. And if you need to raise some serious money quickly, then prepaid debit cards aren’t going to do a thing to help!
Instead, look into getting a safe, affordable and reliable car title loan from Car Capital Financial. We’re Southern California’s premier auto title loans company, and our no credit check loans are the perfect solution for people with poor credit.
All you need is a vehicle that’s paid off, or nearly paid off, and you can get the cash you want in as little as 30 minutes! Title loans are issued based on the borrower’s ability to repay the loan.
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