Check Prepaid Credit Card Terms Carefully
credit cards can be extremely useful tools, allowing consumers
to avoid carrying cash, giving bad credit customers the equivalent
of a MasterCard or Visa, or allowing parents to limit the spending
of their teen or college-age children. In reality, prepaid credit
cards are not credit cards at all, but "stored value"
debit cards that stop the user from spending more than the value
of the card.
The
idea behind prepaid credit cards is great for the consumer.
However, like every product in the credit card industry, prepaid
credit cards are issued by their sponsoring financial institutions
with the goal of creating profit. That means consumers must
pay for the convenience a prepaid credit card provides.
Financial
institutions tie fees to many aspects of card usage, from applications
fees to per-transaction fees to monthly service charges to reload
fees. These fees vary widely throughout the industry, and may
be called different names by different institutions. Therefore,
even more than with standard credit cards, it is important for
prepaid credit card users to read the fine print before signing
up for a card, and to contact the issuing financial institution
if anything is unclear.
Published 09/16/05 (Modified 05/07/12)
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