So Many Shoes, So Little Money – Blog

Prepaid Cards – Not in Your Closet

November 9th, 2008

As plastic and status are becoming more intertwined, more people are turning to prepaid cards. What is a prepaid card? Prepaid cards are a debit card which has a specific amount of money put on the card by you or someone who loves you. Instead of being linked to a bank account, you, or the nice person buying you the card, tell the bank how much money to put on it and that is all you get – unless you or they add more when you run out.

On the plus side, prepaid cards are safer to use than cash – if you lose them you are protected, cannot get you into the same kind of trouble credit cards can – you cannot run up high interest debt, and are more flexible than single-store gifts cards – you can use them anywhere. You can also use them online for purchases and to pay bills.

However, many prepaid cards charge a fee for almost every single thing you do with them. Want to get a card – there is an issuance fee. Want to sign up – there is an enrollment fee. Want to find out how much is left on the card – teller fee. Lose your card and need a new one – replacement fee. Use the card – transaction fee. Don’t use the card – inactivity fee. Want to put more money on the card – reload fee. All those fees add up quickly, leaving you less money to spend. Why would you waste all that money on fees when the world is swarming with stores just calling your name?

In addition, because they are not linked to a bank account, prepaid cards do not help you build your credit. However, there a few new cards which will report your prepaid card transactions to the credit agencies. In theory, this may help you build a positive profile, but it is unclear.

A financially savvy fashionista knows putting down cash with a flourish is way more stylish than paying prepaid card fee or amassing debt with credit cards.

Filed under: Prepaid Cards

Tags: status