Spring Break
EDITORIAL: Don't get scammed by prepaid credit cards
Editorial Board
Issue date: 10/26/09 Section: Commentary
Life as a college student generally involves being a little bit on the broke side. College itself is expensive, and when all the extra costs of food, trips, concerts and necessities like school supplies are added up, many students are left searching for alternative methods to manage money. Bank accounts can be difficult to manage, with only two banks conveniently located on campus, and debit cards associated with such accounts are easy to mismanage, making it easy to drain an account if spending habits are not carefully monitored. Credit cards are another option, but applying for one is difficult, and many also have low limits, high fees and interest rates, should a balance be carried on the account.
A seemingly risk-free and easy-to-manage option is a prepaid credit card. The concept is simple; you purchase a card with a certain amount of capital already on it that can be used just like a credit or debit card. These cards are available at places like Wal-Mart, supermarkets and gas stations. Once the initial amount is spent, the user can add to the balance. This seems like a process conducive to student life. One can predetermine how much will be spent at a time and limit expenses. It also allows students to avoid carrying large amounts of cash on their person or using a credit card for online transactions. But there are many downsides to prepaid credit cards of which the public is generally unaware.
Companies managing these cards are not regulated by the government, and so there is no protection for consumers hit by hidden fees. Most activation fees are at least ten dollars, with charges for ATM withdrawals, adding money to the card, monthly fees, convenience fees on purchases and contacting customer service. A card with 50 dollars can quickly turn to zero even when left unused.
Although they may seem ideal, prepaid cards cost more than they are worth. If you are looking for ways to manage money or to avoid carrying it around, try looking into options like student banking, where a minimum balance can be put on an account, or a debit or ATM card that will not draw past a student's funds.
A seemingly risk-free and easy-to-manage option is a prepaid credit card. The concept is simple; you purchase a card with a certain amount of capital already on it that can be used just like a credit or debit card. These cards are available at places like Wal-Mart, supermarkets and gas stations. Once the initial amount is spent, the user can add to the balance. This seems like a process conducive to student life. One can predetermine how much will be spent at a time and limit expenses. It also allows students to avoid carrying large amounts of cash on their person or using a credit card for online transactions. But there are many downsides to prepaid credit cards of which the public is generally unaware.
Companies managing these cards are not regulated by the government, and so there is no protection for consumers hit by hidden fees. Most activation fees are at least ten dollars, with charges for ATM withdrawals, adding money to the card, monthly fees, convenience fees on purchases and contacting customer service. A card with 50 dollars can quickly turn to zero even when left unused.
Although they may seem ideal, prepaid cards cost more than they are worth. If you are looking for ways to manage money or to avoid carrying it around, try looking into options like student banking, where a minimum balance can be put on an account, or a debit or ATM card that will not draw past a student's funds.
Viewing Comments 1 - 3 of 3
Frank
posted 10/26/09 @ 7:50 AM EST
I'd recommend applying for a credit card and using it responsibly. Make sure you get a card with no annual fee, and be disciplined in how you use it. Pay it off every month and there won't be any fees. (Continued…)
Joey Sullivan
posted 10/26/09 @ 3:57 PM EST
I completely agree. But I used to work at Ruby Tuesday and our card was pretty bad. But, from what I hear, it was typical because most cards either have a monthly fee or pretty limited as to the free items. (Continued…)
Patrice Peyret
posted 10/27/09 @ 12:05 AM EST
Like with every payment instrument, prepaid cards come in a huge variety of flavors. "Open-loop" re-loadable prepaid cards like the Wal-Mart money card only cost $3 to activate and $3 per month. (Continued…)
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