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Prepaid credit and debit cards have been steadily gaining popularity. According to the Mercator Advisory Group, the amount of funds consumers will put onto prepaid cards is expected to go from $60.4 billion to $233.8 billion in just three years, between 2009 and 2012. This represents a 383% increase. The rise in demand has been met with an ever-growing selection of cards. Consumers now have several different options to pick from.
In general, the best prepaid cards are the ones with the least amount of fees.
Side-step Activation Fees
The costs of acquiring a prepaid card differ extensively from card to card. Some cards charge an activation fee which can be as high as $20. However, there are also many options available that have no such activation fee. While an activation fee is only a one-time charge, there is still no real need to pay it because free options are available. Why pay anything just for the “privilege” of carrying the card?
Reload Funds Via Direct Deposit
Nearly every prepaid card on the market offers cardholders the service of direct paycheck deposit for free. The same is true for government benefit checks. Some cards even extend bonus offers of $25 cash to cardholders who opt to sign up for direct deposit. The perks don’t end there. Direct deposit is not only the most convenient way to load funds onto a prepaid card, but there are several cards on the market that do not issue any card maintenance fees as long as a cardholder reloads a certain minimum onto their card on a monthly basis using direct deposit.
Go With Credit
When completing a purchase using a prepaid card, you will usually be given the option to have the transaction processed as either debit or credit. While the basic result of both means of processing a transaction are the same – the purchase amount is deducted from your available balance on the card – the fees levied by the prepaid card company may be very different.
Whenever a customer uses a card to pay for a purchase, the merchant must pay an interchange fee to the bank. This amount is different for credit transactions and debit transactions. As a result, some prepaid card companies charge users a fee for all debit transactions but not for credit transactions, so if given the choice always go with credit.
Change Where You Withdraw Cash
If you want to withdraw money from your prepaid card, be aware that almost all of them charge a fee when you use an ATM to access cash. There are a handful of prepaid cards available that do feature free withdrawals at participating ATM’s. However, those specific locations may not necessarily be convenient. One way to avoid paying excessive withdrawal fees at an ATM is to pull out cash on your card while you are paying for your purchase at a grocery store or retailer. Note that you will need to have the sale processed as a debit transaction in order to do so.