Consumers may want to think twice about prepaid cards

Even as the economy recovers, some Floridians are still working to improve their financial outlook. For people who are struggling to pay bills, there are ways to find debt relief. Unfortunately, as people search for help, they are also vulnerable to companies that may treat them unfairly.

Due to the loss of a job or unforeseen financial difficulties, some people may have reached their credit card limits and no longer qualify for traditional savings and checking accounts. For this reason, prepaid cards are growing in popularity. However, according to Consumer Reports, some prepaid cards come with risks that consumers may want to avoid. 

Because few government regulations apply to prepaid cards, consumers who buy them are likely to pay unreasonable fees. Consumers are charged for basic services such as checking their prepaid card balance or for calling the company for help with their card. Paying these fees over a long period of time could lead consumers deeper into debt. Also, prepaid cards aren’t considered credit, so consumers who rely on them aren’t able to build their credit history, which may reduce the likelihood that they’ll be able to borrow money at a reasonable interest rate.

It is possible that as prepaid card usage increases, the government will begin to regulate it. However, until that time, consumers may want to carefully review prepaid cards’ terms and conditions before purchasing them. Fortunately, people who need financial help have other options. People who are turning to prepaid cards because they face financial challenges may want to talk to a lawyer about personal bankruptcy.

Source: The Columbus Dispatch, “Your money: Prepaid cards can carry risks, high fees,” Heather Somerville, August 4, 2013