Prepaid Credit Cards Aren’t All They’re Cracked Up To Be

You’ve probably seen prepaid credit cards (or prepaid debit cards) in checkout lines at some of your favorite retailers. Maybe you’ve purchased one as a gift or you’ve considered using one for online purchases to protect your privacy. Despite their apparent benefits, prepaid credit cards have some serious downsides — namely their fees.

Prepaid credit card fees can destroy any semblance of a good deal, at least when they start to add up. While not all prepaid cards will feature each of these examples, here are some of the fees you might be subject to with prepaid credit cards.

1. Setup Fees — This is a fee you’re charged when you first purchase or activate a new prepaid credit card.
2. Refill Fees — These are fees retailers may charge any time you refill a prepaid card at one of their locations. Note: not all prepaid cards are refillable.
3. Monthly Fees — Some prepaid cards require you to pay monthly account maintenance fees.
4. Transaction Fees — You might be charged a small fee for every transaction you make (or varying fees depending on whether you use the card for a PIN purchase or a signed purchase).
5. Non-usage Fees — These are also called “inactivity fees.” Basically if you don’t use your prepaid card for a certain amount of time, you’re charged another fee.

Alternatives to Prepaid Credit Cards

With all of the fees associated with prepaid cards, it’s a wonder anyone purchases them. Yet there are situations when they still make sense (such as using them for private online purchases when you don’t want to give out your real credit card or bank debit card information). If you’re looking for alternatives to save on these fees, however, you can turn to some old fallbacks.

1. Cash — If you want to maintain your privacy when making in-person purchases, cash is still your most affordable option.
2. Gift cards — While store gift cards can also come with fees, they often aren’t as bad as those from more general prepaid cards. Consider these for gifts instead.
3. Checks — We sometimes forget about paper banking, but checks still have a place. They can make another great gift if gift cards are too limiting for your taste or if you simply don’t know what store’s gift card the recipient would like.

There is nothing wrong with using prepaid credit cards or debit cards if you don’t have a better option that meets your needs. But in many cases you do. Consider them before agreeing to the seemingly endless collection of fees tied to a new prepaid card.