Using prepaid credit cards ensures that you already have the money to spend before you spend it, unlike many other traditional credit cards. In fact, a prepaid credit card actually works more like a debit card than a credit card. You can use it to take money out of an ATM machine or to make purchases. When choosing the card that works best for you, it is important to understand the fees often involved with these cards.
Some prepaid cards require you to pay a setup fee to begin using it. This fee is deducted from your balance as soon as you open your account. Some companies will also charge this fee each time you add money to the card. The setup fees often range between $5 and $10 depending on the company. These prepaid card service fees help provide those who have bad credit to build up their credit.
The use of monthly fees helps keep you from paying a fee each time you make a deposit or even each time you use the card. The monthly fees vary widely by company, ranging between $.99 and $9.95. This fee is deducted from your balance at the same time each month and doesn’t vary depending on your activity level. Some companies will waive these fees if you make a specific number of transactions per month, however.
Another fee to consider is whether the credit card company charges activity fees of any type. In some cases, you may be charged a fee for a specific number of transactions or if you fail to make a certain number of transactions. In other cases, you may even have to pay a fee if you don’t use the card at all. Each of these fees can range from $1 to $10 per month.
Like debit cards, the way you use your prepaid credit card will impact the fees you are charged. For instance, if you use your prepaid card at an ATM machine, you will be charged ATM withdrawal fees, both from the bank from which you withdraw and the bank through which you have a card. When you make purchases at a store, you have the option of using your card as a debit card or a credit card. Choosing to use it as a debit card with your PIN number results in a transaction fee. For many prepaid credit cards, choosing a credit purchase does not result in a fee.