13 February 2012
Celebrity sponsorship drives interest and questions about prepaid debit cards (Celebrities news headlines)
Celebrity Sponsorship Drives Interest and Questions About Prepaid Debit Cards
MarketWatch (press release) reported
Cards are a hot topic, but may not be right for every consumer; InCharge Debt Solutions offers resources and tips to make an informed decision
Consumer interest and media attention spiked in mid-January 2012 when personal finance expert, Suze Orman, introduced a prepaid debit card with the potential to help improve credit scores. In a unique pilot program, transactions on Orman's cards are reported to TransUnion to determine if spending activity can be included in credit scoring. Other celebrities including Russell Simmons, Alex Rodriguez and even the Kardashian sisters have sponsored cards, bringing broader awareness to consumers; but the question is: Are they right for you?
To shed some light on prepaid debit cards and help answer this question, InCharge Debt Solutions provides the following basic information on how these cards work, the pros and cons along with the three questions consumers should get answered before they sign up. InCharge is a leading nonprofit organization that interacted with more than 1.1 million consumers in 2011 providing free credit counseling and personal financial literacy education.
"Prepaid debit cards certainly serve a purpose and offer many Americans financial opportunities and services for which they cannot otherwise qualify," says Etta Money, president of InCharge. "However, there certainly are some potential pitfalls and, if you're not careful, negative financial consequences can result."
What it is: A prepaid debit card is simply a reloadable card provided by a bank or other financial institution that allows you to only spend up to the amount you have pre-deposited into the account. "Prepaid cardholders want total control of their money and to know in real time exactly what is spent, where, and how much money is left," notes Kirsten Trusko, president of Network Branded Prepaid Card Association (NBPCA). "These consumers are budget conscious and focus on their lowest cost option for the services they need, and they do so without traditional bank accounts, branches and paper."
"A prepaid card can be a useful budgeting tool to segregate funds and enforce spending limits, to limit loss and fraud exposure when traveling, provide secure funds to children or for immigrants to remit money to relatives living in other countries," advises Ben Woolsey, director of marketing for CreditCards.com.
The Pros and Cons: In today's turbulent economy, a growing number of consumers are experiencing credit problems and prepaid debit cards help because they are much easier to qualify and/or pay for than traditional banking or credit accounts. Other advantages include fraud liability protection; Visa/MC/Discover/Amex symbol enabling online transactions; cash from ATM machines; and less costly than check cashing services.
"On the down side, virtually all prepaid cards come with a myriad of fees," cautions Woolsey. "Some prepaid debit cards are clearly more consumer-friendly than others - charging very nominal monthly fees and function much like a virtual checking account." Additionally, disadvantages include: fees for loading money or using the card; more expensive than a checking account and when using an ATM at the host bank; and, very limited reporting to credit bureaus and not likely to help improve your credit like a traditional or secured credit card.
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