The Pros & Cons of Prepaid Credit Cards

 American Express made headlines recently with the announcement that it’s rolling out its first prepaid card targeted to the general population (rather than teens).  Prepaid credit cards, are now the fastest growing segment of the plastic market.  In 2010, transactions were up 35% to some $65 billion, and are projected to continue to gain in market share over the coming years.  While the newer prepaid credit cards are expected to continue with the trend of much lower fees than those of the past, there are pros and cons to prepaid credit cards you should know about before you take the leap



  • It’s easy to get approved, as long as you have the money to load on the card.  You can have a pre-paid card if you have bad credit.  You don’t need a bank account.
  • Most will allow direct deposit, just like a bank account.  This is much cheaper way to cash a check than using a check cashing business which charge astronomical fees.
  • You can’t get into debt with a pre-paid card
  • You can use prepaid almost everywhere you’d use a debit or credit card
  • Prepaid cards can help you limit spending and stay on budget.  You might use one on a vacation, for instance, so you’re not tempted to spend more than you have or drain your checking account.
  • They’re great for introducing a kid on how to live within a budget and use plastic.  Simply load their allowance on the prepaid debit card.


  • They generally don’t report your activity to the credit bureaus, which means you can’t use them to build up your credit score.  
  • Hotels and car rentals generally won’t accept pre-paid cards
  • Many have expensive fees – maintenance, fees for loading money on to the card, activation fees, dormancy fees, declined transaction fees, ATM fees.  Do your homework first to make sure the fees don’t eat into the money you’ve loaded on the card.
  • You may not get the same fraud protection with a pre-paid card as you would with a credit or debit card. Card issuers generally have the option of whether or not they want to protect you from fraud.  Visa and MasterCard have zero liability programs, but there are loopholes – so be sure you understand what kind of protection you have.  Visa’s program, for instance, doesn’t apply to ATM transactions or PIN transactions not processed by Visa. 

About jenniferhamby

Jennifer Hamby, Executive Vice President of My Credit My Future, has worked in the financial sector since 1996. She is dedicated to educating consumers on financial education and responsibility. Having worked in Data Facts’ Nashville office since 2007 as an account executive, Hamby realized the need for financial education that was informative, yet easy to understand and attainable. Partnering with both Junior Achievement, and Tennessee Jump$tart, in providing financial education, opened her eyes to the tremendous benefits in providing financial literacy and resources for consumers to aid in making better financial decisions.
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