Pre-Paid Debit vs Checking and Credit

An emerging financial market in recent years is the Pre-Paid Debit industry. Marketing as been particularly successful in the aftermath of the 'Great Recession' of 2008, caused primarily by credit on crack.

That one's for Wall Street. 

Pre-Paid issuers, such as Young Money records, Wal-Mart, Russell Simmons and even the Kardashians have enjoyed relative profits as many consumers appear to prefer cash/debit transactions over more debt.

After a conversation earlier this week with a fledging ECONtreprenuer in Atlanta who is a musician/aesthetician/ESL instructor, we decided to devote some blog space to the Pro and Con of the Pre-Paid Debit Card - Fees! - to help inform persons considering their usage.

• User be informed - Fees ahead!

In the October 22nd posting on record label Young Money's venture into the prepaid market, we featured a chart of fees from the RushCard website. With cash that you save and stuff inside a mattress, there are no fees to pay! As an economic tradeoff, however, there is also no interest to earn.

In a checking or savings account, it will vary from bank to bank (or credit union) if you have fees to pay. Ask questions if you are unsure if you will have to pay a fee to keep you money in the bank of your choice.

A Pre-paid debit card - such as the wildly successful RushCard - is NOT a debt instrument, so your credit stays intact! You only spend what you deposit into a pre-established account. Fees abound, however, for Initial Activation, Monthly Maintenance, International/Domestic transfers, Adding Money to you account and more. Understand that the amount that you deposit may not be the final balance after the necessary fees are deducted.

For example: The most popular reloadable prepaid debit card in America, the WalMart MoneyCard, charges $3 as a monthly maintenance fee, $3 to reload the card with more cash, $2 to withdraw cash at an ATM or a bank teller, and $1 to find out your balance at an ATM.
As prepaid cards go, that’s a good deal. Other cards charge a lot more, according to a September report by Consumers Union, the nonprofit publisher of Consumer Reports. One striking example is the Kardashian Kard, which has a $9.95 activation fee and charges $7.95 per month, with a $1.50 fee to call customer support and a $6.00 fee to shut down the card.**

Spend Wisely!

delasol



**Courtesy of the Christian Science Monitor