For years, prepaid debit cards were the ugly stepchild of payment card options, wrought with high fees and used predominantly by the unbanked who do not have access to traditional credit or debit cards. But as an April 2015 survey by TD Bank reveals, prepaid debit card use is skyrocketing, with Millennials leading the charge.
Higher-earning millennials are most likely to be prepaid card “power users.” Millennial GPR prepaid card users earning $50,000 to $99,900 per year averaged 10.1 uses per month, compared to an average of 6.2 uses among all GPR prepaid card owners who had used a card that month. One-third of Millennials use prepaid debit cards, and 21 percent of them make over $100,000 a year.
What’s to love about them?
Use like a credit card, minus the debt
You can swipe prepaid debit cards anywhere credit cards are accepted, minus the possibility of ever carrying a balance. That means no interest fees. That means no monthly payments or due dates. And it means no debt, a Millennial’s dream come true.
Better for your budget
From food to clothes, to vacation spending money, you can load prepaid debit cards with only as much as you have designated in your budget. That means no chance of going over (as with a credit card) and no chance of losing track of where your money goes (as with cash).
No credit check
Approval is instantaneous (with ID verification). If you want a prepaid debit card, it is yours!
While prepaid card issuers are notorious for charging high fees, the new generation of prepaid debit cards limit their fees considerably. That’s not universal though, so be on the lookout for activation fees, transaction fees, monthly fees, annual fees, and the like.
Safer than carrying cash
Lose your cash, you’re out of luck. Lose your prepaid debit card, and you can report the loss (or theft) to the issuer. They should be able to cancel the card and issue you a new one (though a fee may apply).
Prepaid Cards vs. Secured Credit Cards
It’s important to understand the distinction, especially if you are trying to rebuild your credit. Prepaid debit card issuers do not report to the credit bureaus. However, many issuers of secured credit cards do.
Find the right prepaid debit card for you. And, for credit repair purposes, you may want to look into a secured credit card, too.