Many people ask what stores sell prepaid credit cards. Some people may be surprised to learn that stores donâ€™t sell prepaid credit cards; they sell prepaid debit cards!
Retail stores, such as grocers, drug chains, electronics retailers, and other general merchandisers may sell prepaid cards, such as prepaid Visa, prepaid MasterCard, and prepaid American Express cards. These cards may be used to purchase goods and services where Visa, MasterCard, and American Express cards are accepted.
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These major credit cardsÂ carry a prepaid balance, deposited by the buyer at checkout. For example, if the buyer wants to purchase $100 worth of goods with the card, she pays $100 plus a fee to activate the card. Although the card looks like a credit card to many people, the cardholder canâ€™t spend a greater amount than she deposits.
Please continue reading to learn more about prepaid cards, costs, and the ways consumers, employers, and government use them.
Why are there so many fees associated with prepaid debit cards?
Multiple fees charged by prepaid debit cards cause many consumers to avoid them. The purchaser pays $3-6 per $100 to activate the gift card. Thatâ€™s a hefty average 3-6% reduction of the value of the purchaserâ€™s money right away.
The Consumers Union report of September 15, 2010 recaps a long list of other prepaid card charges gift cards or reloadable cards), including:
- Monthly charges. Users of Account Now or NetSpend pay about $10 a month to carry their prepaid card. If the user establishes direct paycheck deposit, the issuer may waive the monthly charge. Green Dot charges users about $6 per month to carry a balance of less than $1,000 (or has a history of at least 30 transactions).
- Cash access charges. Users of prepaid cards pay fees to use their card at an ATM machine. Unlike bank debit cardholders who may use the bankâ€™s ATMs at no charge, most prepaid cardholders donâ€™t have a bank to call their own.
- Balance information charges. Checking the credit card’s balanceÂ at an ATM costs the cardholder a fee by the prepaid card issuer, along with any fees assessed by the ATM provider.
- Customer service charges. Prepaid cardholders may be charged for customer service calls.
- Inactivity charges. Failure to use the prepaid card regularly may be costly. Credit card inactivity feesÂ may apply.
- Overdraft charges. Carrying a prepaid debit card should prevent overdraft charges, but that isnâ€™t always the case. If the merchant accepting the debit card runs the card as a credit card, the issuer may not immediately debit the amount. Fees for such incidents may apply.
- Stolen card charges. Unlike a bank-issued debit card, the prepaid cardholder isnâ€™t protected from theft or misuse of his card. Bank-issued protections include limited liability. If the card is stolen and reported within a two-day period, the cardholderâ€™s liability is capped at $50. Prepaid card issuers may provide some protection or none at all when the card is stolen.
Not FDIC insured. The deposit made to the prepaid card issuer isnâ€™t protected by the Federal Deposit Insurance Corporation.
Why does my employer offer a prepaid credit card to receive my paycheck?
Some employers understand that their employees donâ€™t maintain a traditional bank account. JP Morgan Chaseâ€™s payroll cardÂ can help employers to provide direct deposit convenience to employees.
Charges may apply for calls to customer service or for ATM access. The employee payroll card isnâ€™t a credit card. The maximum spending limit on the card is the amount of money deposited in the prepaid card account.
According to the U.S. Treasury in 2011, about 1.7 million employees receive direct deposits to payroll cards.
Why does my state offer access to unemployment benefits on a prepaid credit card?
Some states provide claimants with electronic access to weekly unemployment benefits via prepaid debit cards. The card is stamped with the beneficiaryâ€™s name and a bank logo. The state in which the beneficiary lives makes deposits to the prepaid debit card, usually on a weekly basis. If the beneficiaryÂ doesn’tÂ have a traditional bank account while heâ€™s unemployed, the prepaid debit account provides fast access to his weekly benefits.
Although the card looks like a credit card, the amount that the cardholder may spend is limited to the amount deposited on the card.
An accountant offered to send my tax refund on a prepaid credit card. Is this a good idea?
According to CNN Money,Â the U.S. Treasury decided to offer some taxpayers the option of prepaid debit card access to their tax refunds in 2011. The Treasury opted to work with Bonneville Bank, the issuer of Green Dot cards, to provide cards for those taxpayers requesting them.
Prepaid debit cards serve an important purpose for some cardholders. For most people, the charges associated with prepaid cards make them an expensive choice, as there are no free prepaid credit cards. Thatâ€™s why comparing and contrasting the credit cards in your wallet with offers from other credit card issuers is sensible and smart.
The FREE credit card finderÂ can help you save money by finding prepaid cards that are best suited to your needs!