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The good and bad of prepaid cards

[Tuesday, February 15th, 2011]

Prepaid cards have for a long time been in the eye of controversy. Though these cards are great tools to ensure you stay within spending limits, the exorbitant fees that are associated with these cards make them least attractive. In recent times there have been many prepaid cards that have been launched in the market. Before opting for prepaid cards, consumers need to know the pros and cons of these cards in order to make a well-informed decision.

One of the biggest benefits of the prepaid cards is that it prevents accumulation of debts that cannot be repaid. This helps in maintaining a decent credit score. These cards are best suited for people looking to establish a good credit history. This is only possible however if consumers opt for prepaid cards that report transactions to credit bureaus on a periodic basis.

On this flip side, one has to consider the high fees associated with these cards. Since banks cannot earn revenue in the form of interest rates, there are other fees that are associated with them. Some of the most common fees associated with these cards are the application and renewal fees. In addition to this, banks also charge “loading” fees each time money is loaded onto the card for usage.

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