A prepaid debit card is a card that is used for transactions and purchases. The credit available on the card is paid upfront before the card can ever be used. The credit available to the user represents the amount the person has paid on the account. The prepaid debit card functions just like any other type of debit card. There are common reasons why an individual would use a prepaid debit card.
Process for setting up a prepaid card
The process for setting up a prepaid card is similar to other credit card application processes. The person is required to fill out an application. The information required to complete the application will be similar to any other credit card application. Once the prepaid debt card application is complete, the applicant is screened. The applicant is then issued a prepaid debit card.
Locations can be used
The prepaid debit card can be used in most retailers. The retailers that accept a particular brand or logo are most likely to accept the card with the same logo. Grocery stores, retailers, drug stores, pharmacies, gas stations and other locations accept these debit cards for transactions. The main limitation is that some prepaid cards cannot be used to withdraw funds at banking ATMs.
Reasons prepaid debit cards are used
Credit building
Many use prepaid debit cards for several reasons. They can be used to build credit. Many prepaid card companies have guidelines established that help one build credit. If the individual maintains timely payments, or keeps the balance at a certain level, the person is able to build credit among users. In turn, the issuer will report the payment history to one of the three major credit bureaus.
Budgeting
Some use the cards to maintain a budget. The prepaid debit cards are rejected instantly, if an attempt is made to spend more than the credit available. Some use these cards as a secondary form of cash because it is similar in that money cannot be spent that is not available. Parents may use such a card to educate a teen about finances and maintaining a budget.
Others may use the card as a means of direct deposit. The individual that does not qualify for an account may have to cash a check through a check cashing location. The cashing fees for these check cashing services can quickly add up because the policies governing these locations are lax. Prepaid debit cards usually do not have fees associated with check cashing. One simply withdraws the available balance on payday, and a small fee is charged for withdrawal.
Individuals that Cannot qualify for bank cards
Some may look into getting a prepaid debit card if they are unable to get a traditional bank account with a banking institution. The minimum requirements for getting a prepaid card are less stringent than those of banking institutions. For this reason, the individual is able to get similar privileges associated with a bank through a prepaid card. The safety and peace of mind that comes with having a banking debit card is extended to prepaid debit card users, who would otherwise not have access to these services. For those unable to qualify for a conventional banking card, the prepaid card is a popular option.
There is fine print associated with any financial account, and certain restrictions and fees apply to prepaid debit cardholders. Prepaid cardholders may be subject to transaction fees and withdrawal fees associated with use of the card. One is required to make some form of a deposit before card can be activated. Any mishandling of the card is reported to the credit bureaus, so individuals must maintain a favorable standing with the card company. Different prepaid debit card issuers offer different rates and fees to the users, so it is recommended that the consumer research the various options available. Prepaid debit cards are a great way for an individual to have banking privileges without the fees, hassles and restrictions associated with a conventional financial institution.
Author Resource:
Ken Johns is the author of this article on Prepaid Debit Cards .
Find more information on Debit Card here.
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