Prepaid Debit Cards Cannot Help Rebuild Your Credit score...What Reasons are People using Prepaid Debit Card?

The need for prepaid debit cards has moved from a fringe need to a mainstream. Many consumers are finding it within their comfort and fulfilling to use prepaid cards despite the fees these cards carry. Although there are better options such as secured credit cards and low fees checking accounts, consumers never seem to go for those options. So what are the reasons why consumers are opting for prepaid debit cards yet they cannot help in improving credit score?

The answer to this question depends on preferences, consumer education, and the circumstances in which the cards are being used. Initially, prepaid debit cards were seen as good alternatives for people with bad credit who cannot get credit cards. However, this is not the case today, because there are bad credit credit cards and also secured cards that even people with bad credit can get.

Prepaid cards tend to eliminate the bottlenecks that come with credit cards such as late payment fees, and overdrawing fees on credit card balance. When you make late payment as it may happen with or without your consent, this can put you into a fine of increased interest rate of up to 15 percent in just one missed payment. Although the first and second missed payment may not attract an increase in APR, if it becomes a habit, then you will bear that cost.

Similarly, if you are tempted to use more than the credit limit, you are also subjected to hefty fines because of over-the-limit use of the credit card. These are some of the fees that you can do away with when you use prepaid cards but then again, these prepaid debit cards have their own fees. They charge ATM withdrawal fees, annual fees, monthly fees and other types of fees.

If you are not in bad credit and you do not intend to use a credit card to improve your score, then you may opt for the debit cards. They can help you manage your spending.  A study released by Pew Health Group discovered that consumers are not even wild about the prepaid debit card fees and they say they are better than checking account fees.

Some consumers even cited that they do prefer prepaid debit cards because they simply do not like banks. They argued that banks only lure you to have a sense of comfort while on the backside side they are slowly ripping from your account through fees and other charges.  When the pre paid debit cards first entered the market, they were being marketed as alternatives for people who could not qualify for a credit card. Those days are gone when consumer ailing in bad credit could not get credit cards.

The prepaid cards only offered the consumer a way of using a card like debit card without a credit limit. These cards were and even today are not solving the problem of consumers with bad debt. A prepaid debit is not a good substitute for helping in building credit score. If you have a bad and stinky credit, then be wise and save a few hundred of dollars and use that amount to acquire secured credit cards. Using a credit card can be a good way of building your credit score. You save a few bucks to enable you place a deposit against a secured credit card and be able to get a card that helps in repairing your credit history.