Prepaid Debit Cards

When you're searching for reliable, easily understandable, and dependable financial options, it can be surprisingly common that credit just won't cut it. With interest rates for credit cards at long-term high points and a range of worthwhile cards outside the financial limits of many people, there is a literal legion of people searching for reliable, dependable, and safe ways to continue their shopping.

They've looked at banks cards, which lack versatility and value, being able to be used only at point of sale settings or in ATMs. They've looked at charge cards, which despite strong value for business users just aren't what most consumers need. They've even looked at credit cards, which despite the versatility and value, are just too financially risky for the vast majority of today's top consumers.

Thankfully, however, amid the high-credit, high-fee, and financial predator environment that we're now living in, there is another option. It's known as prepaid debit, and it's a simple way to pay for a purchase using only the balance that you have within your account. Safe, simple, and very reliable, millions of consumers have turned to prepaid debit cards for their personal spending and business.

In this guide, we'll be looking at both sides of the prepaid debit card equation. We'll see their great advantages for personal, retail, and online shopping, and their downsides for these purposes. We'll even look at their advantages for personal spending and budgeting, along with their downsides for consumer safety, refunds and fraud prevention, and their characteristics for the issuing bank.

First, let's look at prepaid debit cards as an alternative to the almighty credit card. For years, credit cards, whether a VISA, a MasterCard, or an American Express, have dominated consumer spending. They've been the source of financing for all transactions, the number one online shopping tool, and an eternal source of credit for the many spend-happy consumers that have grown to like them.

However, as useful as credit cards are, they also have their downsides. While most shoppers know and understand their spending limits, many don't, and having access to a high-limit credit card is a recipe for disaster with many individuals. Likewise, the high interest rates on many of these cards makes them a potential liability with spending, and subsequently interest, gets a little out of hand.

Prepaid debit cards offer almost all of the benefits of these cards, at least for shoppers, with few of the disadvantages. Let's begin with their shopping power. Any outlet that accepts credit cards, even those with a 'VISA-only' type sign in the front door, can take a debit card. This is because almost all prepaid debit cards act using VISA or MasterCard's network, and function just as a credit card does.

This makes them a versatile purchasing tool. It also makes them equally as valuable online. Just as a credit card can be used to buy items from Amazon or another online outlet, a debit card can too. Just enter your card's details when confirming any online purchase – a product, service, or flight – and it will trigger your account's payment, allowing you to make purchases quickly and very easily.

In all of these cases, a prepaid debit card will trigger a transaction from your personal bank account that pays the merchant, just as a credit card would do from its own accruing balance. While this can seem like a great tool for self-control – and, in many cases, it is one – it's also a potential issue when it comes to fraud prevention. Debit cards aren't credit cards in every aspect, and fraud is a big one.

You see, that accruing balance that a credit card has allows you to reverse charges – what's known as a 'chargeback' in industry parlance. This is an action that halts the charge on your card by VISA or another card issuer, and reverses it. In cases where you've been defrauded, or hit with an extra or unexpected charge, a credit card can reverse it. Unfortunately, this isn't possible with a debit card.

This means that should you be scammed online, entering your financial details into an unfriendly or predatory merchant's website, you'll be unable to claim back your spending. Likewise, if your card is compromised or stolen while on vacation, you'll need to report it missing straight away or cancel its spending power, as it's difficult – and often impossible – to reclaim any expenses made from it.

Along with their purchasing power and relative lack of fraud prevention, prepaid debit cards have a number of added advantages for budget-conscious consumers. They're easy to track spending on for many people, with studies showing that spending on needless consumer items and luxuries actually decreases when a debit card – or any form of non-credit card – is used to confirm the purchase.

They are, however, not a good option for big spenders and businesses. While credit and charge card accounts allow you to rack up points, either for airlines or other expenses, a debit card likely doesn't have any built-in spending points or cash-back policy. In this way, you could actually be losing a lot of money and bonuses by using a more conservative and responsible card to make your payments.

Loaded with good, and also with minor disadvantages, a prepaid debit card is a useful tool for those with spending issues and credit adjustment problems. However, while worthwhile, they're not quite a complete replacement for credit. At least, they're not a complete credit replacement quite yet.