As someone who chooses not to use credit cards (even though there are some good rewards programs) I am always interested to find creative ways to get by in a world that is so heavily entrenched in credit card commerce. I think garage sales are about the only place you can still go and not have an option to use a credit card.
While I have long been a debit card user (especially since I found a cash-back debit card) I have been intrigued by the idea of prepaid credit cards. The idea is pretty simple – it is basically just like a Visa gift card that you can swipe to make purchases, with a few additional features/downsides.
After doing some investigating you find that prepaid credit cards actually can be very expensive to use. Many charge fees for activation, ATM withdrawals, purchases, inactivity, monthly service charges, etc.
According to an article in the NY Times about prepaid debit cards they can end up costing the average user $20-$30/month in fees. So they are definitely not cheap. Clearly, getting a free checking account with a debit card (Perkstreet Financial is my fav) is a much better option.
What if you can’t get a checking account?
But for people who can not get approved to open a checking account, a prepaid credit card is another option. They are far from a perfect solution since they are generally pretty expensive to use. A possibly cheaper option would be to use a cash-only system and get a savings account at a local credit union. Explaining your situation to the banker and trying to establish goodwill by regularly depositing into a savings account will help give them more reason to allow you to open a checking account.
The challenge is while a cash-only system works for a lot of things, it is very inconvenient and expensive as well. Paying the monthly bills, for example, requires that you drive to pay the biller directly or purchase money orders and mail them. For this reason, the prepaid credit cards that offer free online bill-pay could make life a lot easier.
Many of the prepaid cards also offer a direct deposit option allowing customers to deposit their paychecks each pay period. So while they are an expensive option, the case could be argued that if you can’t get a checking account, they might be worth it for some customers.
Apply for a prepaid credit card
If you fall into that category and think a prepaid card might work well for your situation, below are a few options. I did some digging and found some of the better prepaid credit cards out there today. Like I mentioned above they all have some kind of fees, so visit the website, read the fine print, and know the rules of your card before you decide to apply for the card.
Below are some of the best prepaid credit cards I found…
Are you a prepaid credit card user?
Have you used a prepaid card in the past or currently? If so, what did you like or not like about it? Got any suggestions for those shopping around?