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Pros and Cons of Prepaid Debit Cards

By Lauralynn Schueckler

Debit cards have become a commodity as many consumers choose to carry less cash, and stick to carrying plastic instead. Prepaid debit cards are popular for many individuals because of the convenience of having a debit card, but knowing they cannot overdraw from their checking account with it. Before running out to sign up for a prepaid debit card it is important to understand the benefits and drawbacks of owning one. 

One of the biggest benefits in signing up for a prepaid debit card is that there is no credit check involved. This is especially beneficial to people with bad or poor credit. A person worried about overdrawing money from a checking account can be confident in knowing that once the money is spent on a prepaid debit card, any further transaction would be declined. This allows an individual to miss out on incurring any fees due to an overdrawn account. Overdraft fees for most banks average around $35.00 per overdraft charge. If you’re just purchasing a coffee and overdraw on your checking account that coffee could wind up costing you around $37.00

Prepaid debit cards also have another great benefit because it is not always safe to carry cash on hand all the time. Using a prepaid debit card is the same concept as paying for something with cash. If the prepaid debit card is lost or stolen, someone cannot use it without knowing the pin number for the card. The fix is as simple as ordering a new card because the money is still available in the account. 

So far, it sounds like having a prepaid debit card can be a great thing, but there are some negatives to owning a prepaid debit card. A huge drawback to a prepaid debit card is the fees associated with the card. Almost all prepaid debit cards have fees for activation, monthly service charge fees, and ATM withdrawal or transaction fees. This can cause a person to incur some hefty cost that would not otherwise be associated with a regular bank checking account debit card. 

Most people who sign up for a prepaid debit card do so because of their credit problems. Unfortunately, having a prepaid debit card does not help with your credit score or credit history. Credit reporting agencies do not include prepaid debit cards when calculating your score. These prepaid debit cards will not help a person who is trying to rebuild their credit.

Do Research and Find Out What is Right For You
Regardless of a person’s needs for a debit card, knowing exactly how a prepaid debit card works is very important before obtaining one. Some people benefit greatly by having a prepaid debit card. Others would be disadvantaged to using a prepaid card over a regular bank debit card that’s linked to their checking account. Weighing your personal options will be the best plan. Remember to do some research before you decide which option is the best fit for you. There are many prepaid debit card companies out there, make sure you are getting the best one with the lowest fees, if that’s the kind of card you are looking for.

Lauralynn Schueckler is the Online Marketing Specialist at Advantage Credit Counseling Service. She is the author for Advantage CCS’s Blog called Dollars & Sense. Advantage Credit Counseling Service is a member of the National Foundation for Credit Counseling. Contact Advantage Credit Counseling at 866.699.2227, or visit them online at www.advantageccs.org.

Views expressed are the personal views of the author, and do not represent the views of the National Foundation for Credit Counseling, its employees, its members, or its clients.


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