Prepaid Debit Cards - helpful or harmful?

February 18, 2006 8:17 AM

I am considering signing up for a prepaid debit card and would like some advice as I don't know anyone who's gone down this path before...

Due to many credit problems in the past, I cannot get a checking account. I have a savings account at my local bank and have my employer deposit my paychecks directly to that account. It has been working well and I have been gradually paying off my outstanding debts. However, I really miss the freedom of a checking account - currently, I have to withdraw cash from my particular bank's ATM before making any purchase at all. Carrying a lot of cash around isn't always a great idea, and if I'm out of town I have to carry quite a bit as there aren't any ATMs that would take my non-debit card which I use to access my savings account. I'm thinking that one of these prepaid debit cards might be just the solution, but I am a little anxious about the lengthy fine print and don't want to get into a situation where I might be making my already shaky credit history worse.

MeFi, help! Has anyone tried to use one of these? Was it really that convenient, or was it a hassle to deal with these non-banking financial institutions? Or, are there alternatives to these cards which would give me the flexibility I need but can't get without a checking account? TIA.

posted by pants to work & money (13 comments total)

also - if anyone has had a positive experience with prepaid debit cards, what recommendations would you make for how to select one of the many offerings?
posted by pants at 8:19 AM on February 18, 2006

That must have been quite a few bounced checks.

You might try a secured credit card. You put $1000 (or whatever) in a locked bank account. They give you a credit card with a $1000 limit. As long as you pay off credit charges as normal, everything is fine. If you fail to pay, they take the money from that bank account to pay off your credit card charges. The advantage over those prepaid cards is that you need not suffer financially - there are no-fee cards available, and if you pay off your balance every month, it need not be expensive. All credit card issuers should offer such a thing. Typically if you handle the card well for a year they'll let you withdraw the security and turn the card into a regular unsecured credit card.
posted by jellicle at 8:32 AM on February 18, 2006

And if your bank gives you any hassles over getting a secured credit card, try a credit union.
posted by WestCoaster at 9:06 AM on February 18, 2006

just watch out for the fees (monthly or transaction) from the prepaid cards. I've heard good things about the Rush Card (from Russell Simmons)
posted by amberglow at 9:18 AM on February 18, 2006

Pre-paids aren't bad, but there are alot of fees associated with setting them up. Also, as noted above, there are no advantages to your credit other than you won't spend more than you have. Whether it makes a bigger wreck of your credit is beyond me.

I have a Green Dot card that I use for online purchases and other places where it is convenient. Never attempted to rent a car or get a hotel room with it though. Also, I rarely use it at an ATM for cash withdrawl. It is nice to know that I can only be scammed for the amount available on the card vs what the credit limit on a regular card would be.

Couple of things:
- Every time you load the card with cash, there is a processing fee. In my case, $4.95, regardless of the amount.
- Depending on where you load the card, you sometimes have to activate the money. Save your receipts! Call the 800#, give the pin and the card is charged.
- Some cards offer a direct deposit feature.

I like it for what it is good for. All tolled, using it, even with the fees involved, have lessened my dependence on credit in general. Also, the fees tend to amount to less than I would have accrued with a CC and a big credit limit.

Of course, YMMV.
posted by lampshade at 9:23 AM on February 18, 2006

When I was much younger, I (successfully) petitioned my parent for a Visa Buxx card. I had no credit history, an on-again-off-again job, and I was ~15 years-old. And, like you, I didn’t want to carry more cash with me than I was willing to lose (not that 14-15 year-olds with erratic employment carry that much cash). I just breezed through their website, but it looks like you could carry one of their cards and just fill it from your savings/checking account ad hoc.
posted by Yeomans at 9:35 AM on February 18, 2006

In the UK "debit card" means a card which substitutes for a cheque book in payment at a store or for cash withdrawl via ATMs. There are no charges as long as you are in credit. It is supported by Visa - so I can also use it to make on-line payments, transactions by phone, etc.

Is this different from what debit card means in the US?

I presume it is - is this why Americans still seem to write lots of cheques? I can't have written one in a decade.
posted by A189Nut at 11:23 AM on February 18, 2006

A189Nut -- "debit card" means the same thing in the US (also called a "check card" -- same thing). I write one check a month, to my landlord who won't/can't accept electronic payment (actually, I have my bank's bill pay service write the check and mail it), other than that very, very rarely will I write a check. So far I haven't found any vendor who will accept a VISA credit card who won't accept my VISA debit card. I, to, wonder why so many people write checks at the grocery store, etc.
posted by redheadeb at 11:48 AM on February 18, 2006

I used to have a Netspend card when I was in a similar situation. I worked very close to a place where I could put more money on the card, so it was very convenient. Fees were reasonable, and they had a program where, for $10/month (so long as I had the money available in my account on bill day), after a year they'd make a favorable report to the credit agencies. That's a fantastic scam, but I did my part and they did theirs. I have no idea if that's still an option, but the card itself worked out fine for me (and I could use it at ATMs).

It would have been very difficult for me to get through that time without it, so I'm glad it was an option.
posted by Lyn Never at 1:14 PM on February 18, 2006

Unless you need the card for ATM use, the easiest thing to do is load up with Visa Gift Cards from Simon Malls (or something similar - but they are the largest and all over the country). They will pre-load the card at the mall for $2. That's it. No other fees unless you lose it, fail to use the funds within 12 months, etc. They don't have your name on them, but they work exactly like a Visa and can be used anywhere Visa is accepted. This includes online use. (They're great if you want to keep online purchases anonymous.) If you want cards with your name on them - you can order them for $5 more. These are not reloadable - but they also don't come with the outrageous monthly/annual fees that these pre-paid cards charge. The Gift Cards are the same thing as the pre-paid Visa - except you walk in the mall, lay down your cash for the card - plus the $2 charge - and use them until the money is gone. Then, go buy another - or three, or four. They can be loaded for anywhere from $20-$500. You can even check your balance and see your purchases online. It's a much better deal than the pre-paid offers.
posted by Gerard Sorme at 1:21 PM on February 18, 2006

One other thing, I just looked at the RushCard mentioned by somebody above....
Activation Fee ---- Up to $19.95
"Convenience" Fee per transaction ---- $1.00
Other little fees they try to get you here and there with. Another reason the Gift Card is a better way to go. The "convenience fee" blew me away with the RushCard. A buck per transaction up to 10 a month!! In other words, you pay them $10 a month for the "convenience" of loaning them your money.
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posted by Gerard Sorme at 1:30 PM on February 18, 2006

Due to many credit problems in the past, I cannot get a checking account. I have a savings account at my local bank and have my employer deposit my paychecks directly to that account.

You need to do far more bank shopping. You have a savings account. You have an employer doing direct deposit. I don't care what you did in the past, unless you were busted for felony bad checks, somewhere out there, there is a bank that will give you a checking account.

Get cleaned up (i.e. dress nicely) and spend a Saturday driving to every single bank in your area. Sit down and talk to a bank manager at each one. Act professional. Explain everything in clear terms. Trust me, you'll work it out with someone eventually.

Don't go the secured credit card route unless it's an absolute last resort.
posted by frogan at 1:45 PM on February 18, 2006

thanks frogan, from the above comments it seems like a cash card should be a last resort after I have exhausted any chance of getting a checking account.
posted by pants at 2:18 PM on February 19, 2006