Prepaid Debit Cards – A Poor Man’s Bank?
Author: weissheiss
Prepaid debit cards are making a dent in the check cashing business. For years check cashing shops have served that part of the financial market that did not have conventional bank accounts. Pay checks, government checks and personal checks are all cashed for a fee that can range from 1.5% to 10% of the face value of the check. Typically people paid these rates simply because there are no conventional banks located in their community.
Enter the prepaid debit card. Both Mastercard and Visa have prepaid debit programs that have significant advantages over the traditional check cashing shop. Probably the biggest advantage is not having to carry around cash. If you have just cashed your weekly or bi-weekly paycheck, what do you do with the cash? Carry it on you? Hide it someplace at home?
With the prepaid debit card, your deposit is recorded and the card is the only thing you need to make purchases at a store, online, or get cash out of an ATM. Funding your card can be done by direct deposit or by reloading the card at one of thousands of stores that provide the service. There is no need to carry around more cash than you need. Because the debit card is using your own money and is not a credit card, there typically is no credit check and most persons are approved online immediately. Because there is no credit check there is no inquiry recorded on your credit report.
While carrying a debit card is safer than carrying cash, there is a downside when it comes to liability. Unlike a credit card which limits your liability for fraudulent use or broken or undelivered merchandise to $50, the debit card has stricter requirements. The card user must report the loss of his card or suspicion that the card has been compromised within 2 days of the event to limit his liability to $50. If the loss is reported after 2 days the liability jumps to $500. If the loss is not reported for 60 days, then there is no protection and your account could be wiped out. The big difference here is if you are disputing a fraudulent credit card charge, you are not out of money. If you report a fraudulent use of your debit card, the bank could take 10 days to investigate meaning you are out that unauthorized use for over a week.
So how do these cards make money for the issuers? If you are thinking about using a debit card, make sure you carefully read the terms and conditions and fee schedule. There are many programs available on the internet and they all have different fee schedules and features. Look for a card that does not charge you to reload if you use direct deposit. Look for a card that will allow you to see your balance online or via telephone without a charge. If you shop carefully, you will definitely save money compared to the check cashing shops.
Posted in Prepaid Debit Cards | 
Tags: Bank Accounts, Bank Checks, Conventional Bank, Conventional Banks, Credit Check, Face Value, Paycheck, Visa Debit