The best prepaid cards are those that offer the most services for the lowest fees. Acceptance is also a major issue amongst competing credit card companies. The Discover card, create by retail giant Sears in the 1980s, is only accepted at 4 million locations.
This is a drop in the bucket when compared to Visa and MasterCard, which are accepted in 170 countries and at more than 25 million locations. When shopping for a credit card, it is important to compare all the benefits of the cards offered.
Prepaid credit cards are all the rage in the digital age. Many card issuers are jumping on the bandwagon and offering new versions of the old stand-by, secured credit accounts. These cards come with a variety of options and benefits and mirror their unsecured cousins for convenience and ease of use.
What should I look for in a card?
There are four main traits your should look for in a prepaid card:
- Acceptance – For convenience, consumers want a card that is accepted at the most places in the most countries.
- Fees – Look out for annual or monthly fees, application or other initial card fees and any reloading fees. Many cards are offered with no fees whatsoever.
- Interest – You won’t be paying any interest for a prepaid card. While prepaid card companies are not obligated to pay you interest on monies you have on deposit, some do.
- Premiums – These can be in the form of special discounts, points awards, bonuses, or even cash.
What are the major players offering?
We already talked about acceptance, and while American Express is still a distant third to Visa and MasterCard, reaching 130 countries, its cards feature a variety of travel benefits unmatched by its competitors. American Express, has aggressively jumped into the prepaid credit card market with features like:
- No annual or monthly fees
- No overdraft or purchase fees
- No credit check
Like all prepaid cards, the Amex card is secured by the cardholder’s own funds and therefore is debt free. Additional card benefits include:
- Purchase and fraud protection
- Roadside assistance
- Award winning customer service
Funds can be conveniently loaded on the Amex card online or by phone and the card will be accepted worldwide, just like the regular American Express Credit Card.
Discover also offers a variety of prepaid card options for its many clients and cardholders. Its programs focus on:
- Retail merchants and mall cards
- Cards for students
- Gift cards and employee incentive cards
- Payroll cards
- Cards for general use
The main consumer advantage is Discover’s Perks Everyday program, which allows card users to accumulate points that are automatically earned and tracked. This differs however from the Discover credit card that features their very popular cash back program. “Perks” may not be as effective in drawing in new customers for Discover’s prepaid card.
Visa and MasterCard logo prepaid cards are issued by individual banks. As such, the costs of these cards and the card premiums and other benefits will vary from bank to bank, so once again, it pays to comparison shop.
Who else is offering prepaid cards?
Banks, savings and loans and even credit unions are all beginning to offer prepaid cards to their account holders and members. The latest card offers are geared towards active families. These family plans allow for several cards under one account and combine the benefits of a credit card with the low cost and set spending limits of a prepaid card.
This program is perfect for teens, college students and other first time credit users.
Why else would I want a prepaid credit card?
Prepaid cards are also great if you’ve had recent credit problems and you can’t get a regular credit card. Using a prepaid card allows you to rebuild your credit history while providing you with the service and convenience of a regular credit card.
If you have credit issues, the last thing you want to do is run up your credit balances. Prepaid cards limit your spending to the amount of money you’ve put down to secure the card. They have all the advantages of regular credit cards with far fewer costs.
When you consider that the only other option for those in a high credit risk category are low limit cards with 25 to 30% interest rates and fees that can consume 25% of an initial credit limit, you’ll definitely want to consider prepaid credit cards.