Financial Pros and Cons of Prepaid Debit Cards

Prepaid Debit Cards

Prepaid debit cards have pros and cons.

Prepaid debit cards have exploded in popularity recently. One survey by shows that consumers are 25 percent more likely to use a prepaid debit card today than they were just a few years ago. But the same survey also shows that prepaid debit cards have a mixed public perception.

Are prepaid cards a smart financial tool or a sneaky money drain? We’re going to lay out the financial pros and cons of using prepaid debit cards. 

Pro: Credit Access

One of the main reasons prepaid cards are becoming popular after the recession is the shrinking amount of credit available. Those who have a rocky past with credit cards are having a hard time obtaining credit and even debit cards, making prepaid cards an attractive option.

Con: No Credit Score Benefit

One of the major cons of prepaid cards is their use doesn’t help build credit. Although prepaid cards are an option for those who don’t qualify for credit cards or traditional debit cards, relying on them for too long can be part of the reason your credit score remains low.

Pro: Budget Friendly

Prepaid debit cards have also become a popular budgeting tool. While credit cards have temptingly high limits and debit cards can hit you with big overdraft fees, prepaid debit cards let you control how much money you have available at a certain time. For those who have trouble keeping track of cash but want to stick to a budget without using credit, prepaid cards are an excellent tool.

Con: New Fees

Fees are one of the unexpected cons associated with prepaid debit cards. Fees can range from using the card too much or too little to not maintaining a balance or just maintenance fees. Be sure to read all the fine print about fees before you sign up. Paying too much in fees for a card you sought as a budgeting tool defeats the purpose.

Pro: Safe Online

With online shopping becoming more popular and in some cases necessary, prepaid cards are becoming a go-to way to make safe online purchases. Rather than attaching a credit or debit card to an online payment, attach a card that only contains the amount of money you need.


Finding a prepaid card with the ability to withdraw from ATM’s nationwide is a great perk.

Con: Coverage Check

Although prepaid debit cards are a favorite for handling money during vacations, be sure to check the coverage available on prepaid cards beforehand. The standard coverage available through debit cards at banks may not apply to independent companies, and you want to ensure your money is safe.

Prepaid debit cards, like many financial tools, are great for certain people at certain times. If you’re having trouble securing a decent credit card or debit card but still need to make purchases on plastic, a fee-free prepaid card may be the best option. But using prepaid cards unnecessarily means you’ll miss out on opportunities to build your credit and may even incur some unexpected fees along the way.

Photos courtesy of MoneyBlogNewz and redspotted