You may have noticed the ads on the Bonus.com for the Anchor Card. (For the record, Bonus.com is affiliated with the company that offers this prepaid debit card). Like credit cards, there are many choices for prepaid debit cards, and it’s often confusing to sort out the benefits for these types of cards.
First, you might be asking, what is a prepaid debit card?
Well, glad you asked. A prepaid debit card works like a credit card – you can use it anywhere that accepts Visa or MasterCard, and use it for online or offline purchases. However, unlike a credit card, you deposit funds on the card ahead of time to make payments so there is a set amount on the card that you can spend. It is impossible to spend more money than you have deposited so you will not be incurring debt.
You are not charged interest when you use prepaid debit cards, but you are sometimes charged application fees, as well as fees for additional services.
Who is a good candidate and what are some ideal situations for using a prepaid debit card?
- Trouble with Credit – If you’ve recently had some financial hardship or struggle and are not able to acquire a credit card, this is a good option. A prepaid card issuer does not need to do a credit check in order to issue you a card. There are many things, such as car rental, that require owning a credit card and you can use a prepaid debit card for these scenarios. In addition, prepaid card issuers do not report your payments to credit bureaus, so it cannot further hurt your credit score. Of course, you are not able to build credit with a prepaid card, either.
- On the Road – When traveling, a prepaid card is not only convenient, but also very secure.
- Debt – Namely, it’s impossible to incur any debt using a prepaid card. This is especially helpful if you are trying to stick to a budget. There are no monthly finance charges. As mentioned previously however, do check the fine print for any additional fees that you may incur.
- Teenagers – If you need to curb some shopping habits, or not worry about your teen going crazy at the mall, a prepaid card may be a good option for your kids.
- Fed Up with Banks – If you are tired of continually seeing overdraft fees, fees for withdrawal, fees for direct deposit, and more and more fees from your bank, the convenience of a prepaid card, without all the extra banking fees, might be ideal for you.
Take a look at a prepaid debit card and see if it’s right for you. If you’ve had any experiences with these types of cards and can share your story, we’d love to hear from you in the comments!
Happy Shopping (and Swiping)!