Some consumers’ credit is so lousy, they cannot even qualify for credit cards. Others haven’t consistent enough income to be approved, and some have no credit at all. All these types have become interested in pre-paid credit cards.
What is it? At first glance, a pre-paid credit card is a lot like a checking account. The user sends cash to the issuer, who then makes that money accessible through plastic. But while debit cards have overdraft fees, and credit cards create debt, pre-paid cards cut off spending as soon as the account is depleted. There are no bills, no overdrafts, and no deterioration of credit.
Pre-paid credit cards can be used where cash cannot, such as at Internet stores and hotels. And bad credit is never a barrier for obtaining one.
So what’s not to love? A couple of things:
No interest. Savings and checking accounts build interest, even in miniscule amounts. The interest on pre-paid accounts is nada.
They’re not accepted everywhere. Many businesses’ payment systems just aren’t equipped. And unlike credit and debit, there’s no guarantee the business will get paid if the account is drained before processing.
A majority of cards won’t build credit. As of writing, only the AccountNow pre-paid Visa/MasterCard reports credit, and only when paying bills. None of the others will help out.
And the biggest issue:
Fees. Every time you deposit cash into the account, the pre-paid issuer takes out a fee for themselves. Sometimes it’s a one-time fee on deposit, but for some cards, there are fees on every purchase.
So the issuer actually builds interest off you, the cardholder. That means you’re the bank!
Are you rich enough to be a bank? Didn’t think so.
Okay. But should I use pre-paid cards? Yes, if you meet certain conditions:
You desperately need to build your credit. That can only happen with the AccountNow card. To minimize high fees, use it for bills and nothing else.
You absolutely cannot open a bank account. A bank or credit union will turn you down for five years if you have been convicted of a financial crime. Otherwise, debit is always preferable.
Anyway: my name is Alexander Carl. I am a recent graduate of the University of North Carolina at Chapel Hill, where I spent four blissful years earning a degree in Communication Studies. Now I face the real world of economic downturns, student loans, and the absence of “academic” camaraderie.
Yet I refuse to be bummed. My economic philosophy is to live simply, save, and maximize whatever I can. Consumer culture is undeniably pervasive, but you don’t have to sell your soul to co-exist with it— there is great power from using your economic resources wisely.
I started writing when I figured out how to hold a pencil. Since then I’ve written short stories, poetry, screenplays, and have blogged. In fact, three of my screenplays have been produced into short films, two of which I directed. I’m no stranger to the media, having served as a DJ at a freeform radio station and worked as a crew member for live TV.
Pastimes include traveling (I’ll visit virtually anywhere), swimming, jogging, hiking, and hunkering down with a good movie.
Overall I’m a peaceful person, though not in a creepy New Agey way. I get my energy from music, good conversation, and the outdoors (I was an active Boy Scout, earning my Eagle). I consider myself “inquisitive” and “wry”, and for the sake of autobiography I’ll assume that I am.