Whether we talk about the total amount of payments made using a prepaid debit card or the total number of transactions made using a prepaid debit card over the last few years, it is clear that prepaid debit cards have become more and more popular among consumers. In fact, according to the Federal Reserve Payment Study for 2016, the volume of prepaid debit card transactions increased at an annual rate of 7.1% from 2012 to 2015 alone. Additionally, the Consumer Financial Protection Bureau projected that the number of prepaid cards sold will continue to grow at 22% annually from 2015 to 2020.
But what is with prepaid debit cards that make them really appealing to the masses? The numbers alone are proof that prepaid debit cards have numerous advantages; otherwise, they wouldn’t be as popular as they are now. In this article, we will discuss the main advantages of prepaid debit cards.
But first, what is a prepaid debit card? How does it work?
A prepaid debit card is a plastic card that looks similar to the usual credit or debit card. It has a designated number indicated on the front, a magnetic strip on the back, a chip, and a logo such as Mastercard or Visa.
However, unlike credit cards, a prepaid debit card has a spending limit which you set or load yourself. It does not give you the option to purchase goods using a pre-agreed credit facility. This means that you can only spend what you load onto the card. Once the money on the card is used up, you cannot use the card to purchase goods anymore unless you reload funds onto it. In short, a prepaid debit card has the convenience of a credit card and the power of cash.
Why should you get a prepaid debit card?
There are various reasons why you should get a prepaid debit card. Here are its key advantages:
Guaranteed approval – The process of acquiring a prepaid debit card does not require a credit check, background check, employment verification, and other compulsory documents needed for opening a credit line. This means that everyone, even those with poor credit scores, no credit history, or those who are currently unemployed, can get a prepaid debit card. Additionally, you do not need to open a bank account to get a prepaid debit card (more info here).
Safer than cash – A prepaid debit card is a quicker and easier alternative to carrying cash. You still have the power to purchase goods using your money, but you do not have to carry around physical bills and coins with you.
Worldwide functionality – Even if you travel abroad, your prepaid debit card can still be used. As long as a merchant payment network (such as Visa or Mastercard) is available, you can pay for your hotel, food, fare, and more using your prepaid debit card. It is important to note, however, that some cards are only available in specific currencies, so be sure to check your prepaid debit card before you travel. There are some cards that can be used in other countries automatically.
It helps you avoid debt – As you can only spend the amount of money preloaded onto the card, a prepaid debit card can help you control your spending. It can help you increase your financial discipline and develop positive financial habits. This advantage makes prepaid debit cards a great option for those who have the tendency to overspend or those who rely on credit purchases. With a prepaid debit card, you won’t have to worry about next month’s credit card bill!
It can be used for online and phone transactions – As mentioned before, prepaid debit cards have the convenience of a credit card. You can use it to purchase goods and pay your utility bills or your mortgage, online or over the phone. We exist in a fast-paced environment nowadays, and it’s sometimes hard to find time to drive to the utility company and pay the bills, or drive to the bank and pay your dues. If you live a busy life or if you are someone who has the tendency to forget billing due dates, a prepaid debit card is a great option for you.
Easy tracking – With all the software and web-based programs available nowadays, it’s now very easy to track your prepaid debit card purchases online or over the phone. This helps you to control and monitor your expenses, keep records, plan your budget ahead, or dispute the transactions if necessary!
Protection against fraud – Since most prepaid debit cards are not linked to a bank account and have no credit agreement, swindlers and scammers cannot hack the details of your bank account or purchase goods in credit in your name. If you do lose a prepaid debit card, you can only lose the amount of money left on the card.
Reloading of funds is easy – With a prepaid debit card, you can load funds using cash or using direct deposit. You do not have to go to the bank and settle bills, and you only need to load funds when you need them.
There are many more advantages to using prepaid debit cards; we have only listed the main benefits. If you do not have a prepaid debit card yet, go ahead and try to get one and experience for yourself how convenient it is to purchase goods using a small yet powerful card.