Expert: Kathryn Nye - 9/26/2003

Question
Hello,
I recently saw an advetisement for prepaid Credit Cards. From what I read I see that its basically a debit card. My question is are they're any risks associated with pre-paid credit cards? They do require you to give your bank account number I believe, or you have the option to direct deposit from your paycheck.  What's your opinion on the matter?
Thanks

Answer
Andrea:

These can be really good or big scams. They are becoming more and more common now with so many people who have bad credit and baby boomers sending kids off to college.

Here's what to watch for:

-Try to find a big, well known bank that offers them so you know you aren't being scammed by a bogus bank. I think Citibank offers one called a City Cash card. Bankfirst has a line of cards called Euphora Cards. Merrick Bank has a prepaid card. The hot one now is at wiredplastic.com but I don't know what bank backs that one.

-Look at the fine print. Most cards charge a set up fee and maybe a monthly fee. Some charge other fees as well. Make sure you know and look for every fee they would ever charge for anything. You can usually find them in their terms and conditions sections of their websites.

-Find one where you control how they get the money. Not all prepaid cards require direct deposit and most do not require a bank account. Many can be paid through Western Union or through a one time bank draft that you authorize or by simply sending in money directly.

Hope this helps you out. I personally think this is the way it should have always been. Credit card spending has gotten out of control.

Kathryn