What is the first thing that comes to mind when you think of prepaid cards? Do you think of them as an alternative to cash? Are they the same as a debit card? Are they synonymous in your mind with holidays, since you've either given or received them as gifts?
The fact of the matter is that there's a lot of confusion and misunderstanding out there regarding reloadable prepaid cards. Many people don't comprehend their strengths, the variety of options that are available and how they've evolved over the years. With all of the functionality of a debit card, but prohibiting consumers from spending more than they load on the card, this product provides a convenient financial service with significant benefits and control.
Here are five of the most prevalent myths surrounding reloadable prepaid cards, and the truth behind each of them:
• All prepaid cards are essentially the same.
Many Americans looking to choose a reloadable prepaid card do not always pay attention to the details when selecting one. After all, they think, all prepaid cards are essentially the same. But in fact, all cards are not created equal. Costs for loading, maintaining and using cards vary greatly. Before getting a prepaid card, it's important to shop around and compare fees. A good rule of thumb is to look for a simple, easy-to-understand disclosure form. Also, make sure the limits are appropriate for your lifestyle. Beware of low load limits with high load fees.
• Prepaid cards haven't changed over the years.
Since their inception, reloadable prepaid cards have evolved and become stronger options for American consumers. For instance, nowadays, there are a number of ways to load money onto a prepaid card, with many offering direct deposit capabilities. Furthermore, some newer reloadable cards are specifically designed with parents and teens in mind -- giving parents the ability to have controls and new opportunities to have conversations on how their teen is spending money.
• Prepaid cards can only be purchased in drugstores or other big box retailers.
Reloadable prepaid cards can now be purchased at most banks, often with a more favorable cost structure than other cards. In addition, you are able to actually speak to a bank representative about the benefits and features of the card, versus just trying to figure out how the card works from a small package.
• Cash is easier to manage than a prepaid card.
Some American consumers think that the benefits that reloadable prepaid cards offer are outweighed by how much goes into managing them. But in many circumstances, reloadable cards are easier to manage than cash. For instance, for parents who find themselves needing to quickly get money to a child or teen who's not physically nearby, cash isn't a great option, but many reloadable cards are, since funds can be loaded quickly via debit or credit cards. Plus, even if you find yourself in a situation where cash is needed, most prepaid cards allow you to take money out from an ATM. Reloadable cards also provide a great way to shop online, where cash isn't accepted.
• All prepaid cards are FDIC-ensured.
Not all reloadable prepaid cards are FDIC-insured. In general, it's a good idea for consumers to search out a card that is covered by the FDIC. Doing so will help ensure that their money is secure, even in the unfortunate event that the card issuer fails.
Reloadable prepaid cards have evolved over the past few years, but many Americans are not informed on how to compare and benefit from this financial product. These cards can be very beneficial for a variety of consumers, as long as they devote the time to finding the card that's best for them. If you're unsure which card might meet your specific needs, a conversation with an expert at your local bank could be a good starting point.