Prepaid Debit Cards: What are the Benefits?

 By: Aftab Ahmed
With the high fees involved in using a credit card, it's understandable that people not earning enough including those with no bank accounts would resort to the prepaid debit card. Data from research company Aite Group revealed that approximately 70 percent of people using the prepaid cards are those earning below $45,000.

This card has its advantages. For one thing, it is easy to use because people have fast access to their money and they can use it to purchase online or through electronic kiosks. Secondly, a user does not need to provide too many personal information. Also, the owner of this card does not need to visit any bank branch. Those who are not creditworthy also benefit from this. The other advantage is that users learn how to budget because they need to spend only within the amount that they've loaded on the card.

This card is also helpful to those who are receiving disability, unemployment, social security, veterans' aid and other government benefits on a regular basis. As the U.S. government is about to phase out the use of checks by 2013, people receiving benefits have two choices. They can open a bank account or use a prepaid card. The second option is considered to be more convenient particularly for the elderly.

The prepaid debit cards are often preferred by people who do not have or who want to avoid bank accounts. Currently, reports say that more than 10 million households in the U.S. use this type of card. It is also expected that the amount loaded into these cards will increase to $288 billion by 2014 from only $41 billion in 2008.

Unlike using a credit card which involves several fees from the ATM use, cash advances to finance charges and interests, the fees for the prepaid are very minimal. The activation fee can only be around $10 plus the monthly fee can only be $9 while the fee for using an ATM for withdrawing money is at only around $2.50.

Unfortunately, the latest report says the swipe fees for this type of card are bound to go up next month. This is through the implementation of a new rule that will require companies to lower their fees against charge retailers. As such, the card issuers will be forced to recoup their lost revenue and the only way they're going to achieve that is by raising fees for the people who use the prepaid debit cards.

The increased fees, however, are not expected to be carried out immediately. Authorities say there's still a lot of work involved when making the changes including the coding to distinguish the debit cards from the other types of card. Until then, users can still decide on whether or not to continue using what they have or open a bank account regardless of the fees involved.
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