Prepaid Credit Cards - How To Choose The Right Account

Posted by Nick Niesen on October 29th, 2010

When searching around for the best prepaid credit card, the main thing to consider are the fees associated with the card. The costs associated with prepaid cards are arguably the main disadvantage.

1) Application Fees

Some providers will charge you for opening an account, some offer free accounts and some accounts can be set up for free provided you preload the card with a certain amount of money.

2) Is there a monthly fee to use the card?

Again, some cards are free, while others make a small charge, perhaps $10-20. If you find a card that charges a monthly fee, find out what you get for that fee. Do they provide online statements, a helpdesk, additional insurance etc?

3) Will you be charged a fee when you load money into your account?

Does it vary according to the method that you use, for example, cash, credit card or bank transfer? And if you deposit money through a bank, supermarket or post office, will they charge you a deposit fee?

4) Will you be charged when you purchase goods and services on your card?

If so, do the costs vary according to the method of purchase (online, offline etc)? What about the charges for purchases overseas or in different currencies?

5) Will you be charged when you withdraw cash from your account through an ATM?

Will this be higher for foreign transactions?

6) Other Unexpected Charges

Will you have to pay for calls made to the provider's helpline? Will you have to pay for a courier to deliver your card? Will you have to pay for your card to be renewed when it reaches its expiry date? If you lose your card or it is stolen, will you be charged for a replacement card? Will you be charged a fee to close your account?

Find out all the potential costs that will apply to the way that you intend to use the prepaid card. How much would they cost you over the course of an average year?

Choose the card with fees that will suit your use. For example, if you don't intend to spend much through your prepaid card, but want it for the flexibility that it offers, go for a card with no setup of monthly fees even although it might have higher transaction charges. On the other hand, if you intend to route most of your monthly spending through your prepaid card, a card with monthly fees and no/lower transaction charges might be best for your circumstances.

The main thing is to compare the prospective costs of each card against other prepaid cards and also traditional credit cards. The costs of all prepaid cards should continue to drop as the demand for them grows and the market becomes more competitive. Better deals for prepaid consumers will appear all the time.

But bear in mind that the lowest costs won't always be the best option. If you're in debt and need to cut up your credit cards to prevent you from sinking any deeper, slightly higher fees on the safety and flexibility of a prepaid card may be preferable to keeping your existing credit cards and being tempted further into debt.

It's also worth taking other practical considerations into account, besides the overall costs, including;

How can you add money to your account? How many options do they provide, bank, online etc? Can you do it 24 hours a day?

Can you manage your account online?

Is there an additional card? Is it free?

What level of purchase and fraud protection does the provider offer?

As with all things financial, shopping around is vital to get the best deal on your new prepaid card.