Why Your Prepaid Card Is Not as Free as You Think?

Cards like the prepaid cards are in high demand. This is because they let you pay without the hassle of actually carrying money with you. Prepaid cards are cards that come with some fixed amount of money already assigned to them, which can be used to carry out the required shopping. However, that does not come without no convenience. In fact, there are several drawbacks of using such prepaid cards.

Read further to know the hidden fees involved, usage restrictions, what all you might be missing out and how you can better your usage of these cards.

Prepaid Cards: Hidden Fees Involved

As we said, prepaid cards come with some amount of balance. We may consider the whole amount useful for our purchases, however that might not be entirely true. The following hidden fees may be charged, slowly cutting down your balance:

• Maintenance charges per month
• ATM withdrawal charges
• Customer service call fees
• Inactivity fees if you let the card remain unused for a certain time period
• Activation charges for making the card usable
• Reloading charges as you add some money to the card
• Balance inquiry fees

Hence, while many of you may think that the card serves as a low-costing tool for you, you might be instead suffering overall losses.

Prepaid Cards: Usage Restrictions

There is a lot of possible inflexibility attached with prepaid cards.

Here are some of the usage restrictions:

• The prepaid cards, depending on their types and other particulars, may not be accepted everywhere. This prevents you from using them as and when you need.
• The cards may face rejection. Certain merchants may reject them if they place holds on cards. This is possible with hotels and car rentals, doesn't whether your card is branded with Mastercard or Visa logos or not.
• Prepaid cards are also not useful when you need to do recurring payments or subscriptions. Hence, you may not find them practical enough for some common expenses of today's world, like phone plans, streaming services and utility bills.

You may also like "Why Your Prepaid Card Will Not Help in Building Your Credit Score?"

You Might Be Missing Out with Prepaid Cards

Here's what the cards may devoid you of:

No Cashbacks/Rewards

Credit cards and debit cards often come with benefits like cashbacks and rewards. They also offer travel rewards or points for your expenses. However, when it comes to prepaid cards, there are no such benefits to be enjoyed.

No Interest/Earnings

Usually, when we purchase cards, we seek variety of financial benefits arising out of their usage. Unfortunately, prepaid cards do not contribute to any interest earnings, playing no additional role in your financial improvement.

Credit History

As we know, when we responsibly use credit cards or even various secured credit products, that improves your credit history with time, helping you take the advantage to the next level. With prepaid cards, there is no impact on your credit history, whether or not you use them sincerely.

Comparison with Certain Alternatives

Secured Credit Cards

Secured credit cards are cards that need you to deposit an amount initially. This amount serves as your credit limit. Now, your financial activity carried out with a secured credit card helps you build credit history with time. There are additional advantages such as lower fees and rewards offered, all of which is missing in case of prepaid cards.

Digital Wallets

Digital wallets are a concept that is highly offered by fintech companies. Digital wallets come with many benefits like full-service checking accounts, no minimum balances, access to so many ATMs and free transfers too. They let you earn far more value of the money than with prepaid cards.

How to Use Prepaid Cards Wisely?

The following tips can help you avoid unnecessary costs while using prepaid cards:

Reading the Fine Print

One must go through the fine print thoroughly before you finalize the purchase of a prepaid card. Take the benefit by seeking for options that charge low or no fee.

Getting the Card Registered

Get your prepaid card registered so that you can make online purchases. Also, in case the card gets stolen or lost, registration will help protect the card balance.

Using the Card as Cash

When you use the card like cash, you are able to keep a track of your spendings. Prepaid cards often do not offer overdraft protection.

Avoiding ATMs

While you should avoid frequent ATM withdrawals, you should also prefer in-network ATMs for fee reduction.

Also, avoid loading the prepaid card with high sums of money, as you do not get to earn any perks like interest on the same.

Recent article "Best Entry-Level Credit Cards in India 2025"

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