Prepaid credit cards are a good alternative if you need to make transactions using credit cards on the Internet or on the telephone (other than renting cars) and if you do not have access to traditional credit cards. They can be very expensive, but if you do your research, you can find prepaid cards that offer you a good value for the function that they serve. However, there are many instances when using prepaid credit cards may not be optimal.
It is difficult to rent automobiles using prepaid credit cards with many major American car rental companies. There are some that allow their use, but many do not. For plans that include car rentals, it is advisable to use a bank-issued credit card, preferably one bearing the Visa, MasterCard or American Express logo. If you can rent a car using a network-branded prepaid credit card, accept the insurance offered by the car rental company (unless other insurance is present) because almost no prepaid cards offer insurance on car rentals.
Can You Use Prepaid Cards Online or to Pay Bills?
Almost all other transactions can be completed with a prepaid credit card as they would with any other card. Both online purchases and hotel bookings can be made with these cards. In many instances, those accepting payment may even be unaware that a card is prepaid.
Prepaid Credit Cards and Fees
Prepaid credit cards have annual or monthly fees that range from $12 per year with the American Express Self Serve to well over $300 with the NetSpend Prepaid (Pay As You Go) and mPower Visa Prepaid Card. It is easy to minimize costs if you do your research before selecting a card. Some cards may offer benefits that make high fees worthwhile.
Prepaid credit cards can usually be reloaded at storefront locations or online. These transactions may carry fees, depending on the card you are using. Some prepaid credit cards allow you to make ATM transactions to withdraw money, though there is often a fee involved.
When you use prepaid credit cards to purchase goods online or in a foreign country, a currency exchange may be necessary. The amount charged for these exchanges varies and can add significantly to the cost of using the card.
Loss or Theft of Card
Most prepaid credit card companies offer protection in the event of loss or theft of a card. However, this protection is not mandated by any federal or state legislation. Companies offer the safeguards to attract and retain customers, and they have the ability and right to make changes to guarantees of reimbursement in the event of loss at any time. Deposits tied to prepaid credit cards are not expressly protected by the Federal Deposit Insurance Corporation (FDIC), even if the cards are issued by banks that also offer other accounts that are protected.