A financial tool that is gaining popularity is prepaid credit cards. They advertise easy money and a user friendly approach, while promising a no-hassle, no fee guarantee for consumers. However, a closer look into the details of these credit lines highlights some growing concerns.
One of the more popular prepaid credit cards that is highly advertised is the Rushcard. This card is set up to accept cash from in person or paycheck direct deposits of consumers. The appeal is that consumers can load their money onto the card and use it anywhere VISA or MasterCard is accepted.The card can be used to buy virtually anything and pay bills online.
Many people are tempted into using these cards because of their promotions that they do not charge overdraft fees, interest fees and even offer reward points for spending. They offer money tracking tools and low balance text message alerts to assist consumers in managing their money. While this card may help keep some people out of credit card debt and prevent them from accumulating penalty fees, are they really helping consumers in the long run?
Sure a prepaid credit card can prevent unnecessary debt and the associated consequences of credit damage, but they are riddled with hidden terms and conditions that often trick unsuspecting consumers into a money trap. For example, these cards claim they can repair and rebuild credit, which is not possible. Since the money is paid in advance there is no loan, which is the source by which credit is built. These cards can be especially problematic for anyone exiting bankruptcy looking to repair their credit, they simply do not work. Further, many of these cards have hidden fees for ATM, cash withdrawals or other transactions that can cost a consumer triple what they acquired in cash. In fact, the Rushcard and similar institutions are currently under investigation in Florida for making fraudulent claims and misrepresenting services.