Prepaid Debit Cards
Pros and Cons of Using Prepaid Debit Cards
The prepaid debt card industry was founded during the early 1990s, as credit card companies began to recognize the potential for profit among customers who could not qualify for a traditional credit card. Likewise, many customers who qualified for a credit card account often filed for bankruptcy or defaulted on their balances. The credit card industry discovered that, by offering secured credit cards, they could continue to collect the interest and fees of a traditional card while avoiding financial loss. These cards varied in terms and conditions, but all required an initial deposit. Over time, and with regular, responsible use, some credit card companies offered consumers a small line of credit.
The secured credit card segment of the market began to take hold, more consumers desired to avoid a line of credit altogether, opting for the deposit-based account. These accounts, in turn, came to be known as the prepaid debit card. The amount of credit on these cards was in direct proportion to the amount of money deposited, and could be used anywhere that credit cards were accepted.
Today, the prepaid credit card continues to serve a large portion of the general public. In some cases, working individuals choose to use the card for direct deposit of their employment or government benefit checks. Unlike the cards of yester year, prepaid debt cards now carry the Visa or MasterCard logo and are accepted at most places of business, including international locations. Consumers report that these cards are much safer than cash, as most cards offer some form of unauthorized transaction protection. Credit card bills, large payment requirements, or unrealistic interest rates are worries of the past. Finally, prepaid debit cards open a whole new world of financial stability to anyone over 18, regardless of credit or job history, allowing them to secure rental cars, hotel rooms, and vacation packages.
While there are numerous advantages to using prepaid debit cards, there are a few disadvantages. For one, it is more difficult to obtain cash from a debit card than a bank or credit card, especially if cooperative ATM machines are unavailable. Some prepaid cards charge fees for each transaction, deposit, or ATM withdrawal, while others may charge for non-use after a period of time. Finally, in the event that the card is lost or stolen, it is much more difficult to report the loss, as prepaid debit card issuers have strict notification requirements.
Overall, the prepaid debit card industry provides a venue for financial freedom for those who cannot qualify for any other type of debit or credit card. The pros of using these cards, it would seem, outweigh the cons. While bank accounts and credit cards require specific qualifications, a prepaid debit card is available to anyone, anywhere, regardless of personal circumstances.
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