Evident by our national debt, number of bankruptcy claims and amount of debt per American citizen, millions of Americans are unable to manage debt conscientiously. Credit card bills, car payment, mortgage payment, a small business loan, student loans . . . we all know how easy it is to accrue debt. And we all know how easy it is to let those payments slip by for just one more week or month or year. Poor credit history can result from failure to pay your debts, large or small, to individual creditors. Unanticipated hardship, such as the loss of a job or unavoidable expenses due to a medical emergency, can also push your credit into the danger zone.
However, our society makes credit cards feel almost like a requirement. Just try to book passage on an airline, rent a car or reserve a hotel room without the ubiquitous plastic. Not only do these businesses use credit cards as a guarantee of payment for reservations and to pay for incidental and unexpected charges, but in today’s environment of heightened security concerns, they are an indispensible part of identifying legitimate customers.
Due to the variety of factors that contribute to poor credit history, many are unable to qualify for a credit card, making it almost impossible to function in today's buzzing online community. While others stay away from credit cards so as not to chance the possibility of creating more debt than they can manage. If you're in either of these situations, we may have the answer for you: A prepaid credit card, also known as secured credit cards. We've determined that the best prepaid credit cards are from Mango, NetSpend and AccountNow.
There is a misnomer that we should clarify before we continue: A prepaid credit card isn’t a credit card. Indeed, it’s a special category of debit card. Using a conventional debit card makes a withdrawal directly from your bank account. It’s essentially like writing a check. Prepaid cards, on the other hand, withdraw funds from an account that you specifically set up and can access with the card. To get and use a prepaid card, you don’t need a bank account, a good credit score or any kind of credit history. With a prepaid credit card, or debit card, you never incur debt because you’re just accessing money that you’ve placed on deposit with the card issuer. For more information, please visit our Learning Center to read additional articles on prepaid credit cards.
Fees & Charges
The sad reality of using a secured credit card, or debit card as they’re more accurately called, is that there seems to be a charge for just about everything. There is typically an activation fee and a monthly fee. Many companies also charge for making purchases, and we couldn’t find a single one that didn’t charge for making ATM cash withdrawals. A few cards also have fees for getting a printed monthly statement, for calling customer service, for replacing lost or stolen cards and, perhaps most distastefully, inactivity fees that they charge if the card isn’t used for a period of typically 60 or 90 days. If you need to use your card outside of the country, you can, but expect a typical conversion fee of 2 percent of the total transaction.
The good news is that the prepaid card company will waive most of the common charges, such as the monthly service fee, if you load a certain dollar amount or if you have your paycheck or other recurring income, such as social security or welfare payments, deposited directly to the card account. The key is to compare the fees that you will be charged for the various activities and to choose the card that minimizes the expense for your own personal spending habits.
Although most features are standard across the board, such as online account management and email or text message alerts for specified account activities, we do appreciate the few prepaid credit card companies that offer more than your typical goodies. Mango, one of the best prepaid credit cards, for example, has an amazing website complete with exceptional money management tips. They also offer a mobile app and a savings account option.
Direct deposit is one of the most advantageous ways to make deposits to a prepaid credit card. Many of the prepaid cards do have a max dollar amount, however, so make sure your monthly check does not exceed that limit. If your company does not offer direct deposit, there are other methods to load money to your card. You can transfer money directly to your card from your bank or make cash deposits though agents such as Western Union, MoneyGram and Green Dot. These outlets are frequently located at the customer service counter of major retailers like Walmart, Kmart and Target, as well as at grocery and pharmacy chains, convenience stores and check cashing businesses. Be aware that these agencies will charge you a fee for the cash-loading service or card.
In addition to looking at the methods of charging the card, it’s also important to make sure that the monetary limits of the deposits meet your needs. Some cards will accept a total balance of up to $10,000, while others are as low as $2,500. The number and amount of deposits that you can make also varies from card to card.
Secured business credit cards vary widely in the amount of money that they allow you to spend on a daily basis, as well as in the amount of cash that you can withdraw. Most limit daily ATM cash withdrawals to about $500. Some, however, have higher limits. Daily purchases are typically limited to amounts between $500 and $2,500.
Help & Support
We tend to place a lot of emphasis on high-quality customer support, regardless of the type of business we’re rating. With just a few exceptions, we're disappointed with the depth of customer support most of these companies offer. Most notably, it’s disappointing that some of these prepaid credit card providers charge customers for customer support. But, the majority of the prepaid cards do offer a FAQs section and email support for free.
A prepaid credit card or debit card can be indispensible if you don’t have access to other lines of credit or credit cards. Because charges for these cards do vary, we encourage you to carefully review each prepaid card with our side-by-side comparison chart to determine which card will meet your personal needs.
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Disclaimer: This content is not provided or commissioned by American Express. Opinions expressed here are author's alone, not those of American Express, and have not been reviewed, approved or otherwise endorsed by American Express. This site may be compensated through American Express Affiliate Program.