ON YOUR SIDE ALERT: Knowing the terms of pre-paid cards
RICHMOND, VA (WWBT) - A 12 On Your Side Alert if you have a pre-paid card - you may not have the same protection as credit or debit card users. It's a problem consumer advocates want to see changed.
They're a popular choice for millions of people, but credit experts say there are two sides to prepaid cards. There's the good:
"One of the things it helps you do is to control your budget. Once the money is gone from the card it stops working," said David Holt with Clear Point Credit Counseling.
Then there is the bad. Most of it comes in the form of hidden fees and other rules in the fine print.
Consumer awareness is key. If you don't do your research, the card could be a bad decision.
"You are going to end up draining your bank account that is very conceivable. I had a daughter that did that," he said.
The Consumer Protection Bureau is pushing for the cards to be more transparent.
"Not all of the disclosures on debit cards are in the package in some cases you have to actually go online to find out what the actually terms and conditions and fees may be," Holt added.
The CFPB created a section on its website to help consumers. It's a searchable online tool with answers to nearly a hundred questions about pre-paid cards. Bankrate.com is another great resource. It has a list of prepaid cards and breaks down what fees you will be charged.
"There are ways to avoid fees. The ATM fees, the balance statement fees, there are ways to do that but you just need to understand how to do that with each card," explained Holt.
Another thing to keep in mind if you sign up for one of these pre-paid cards -- it won't help build your credit.
"One of the things people don't realize is that there are card companies out there that say this will help build your credit by having a pre-paid debit card. Well, I am not aware of any prepaid debit card that reports to one of the big three Equifax, Experian or Transunion," he said.
Holt doesn't advise against using pre-paid cards, but says if it's your choice - make sure you understand all the terms and conditions before you activate it.
Holt says once you've done your research on the pre-paid card - they may be a good option for allowances for your children.
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