If Credit Cards Appear too Risky, could Prepaid Debit Cards

If Credit Cards Appear too Risky, could Prepaid Debit Cards be a better Idea?

Colleges around the country these days have rules against credit card companies marketing their products on campus. They've found out through long and painful experience that students, if they are allowed credit cards, just use it irresponsibly and then rack up crippling amounts of debt by the time they graduate. To counter this, the credit card companies have come out with something new they call them prepaid debit cards.

When it comes to marketing to college students, the financial companies are all about prepaid debit cards these days. These are like debit cards, except that they are issued independent of any checking account. What's in it for the issuing companies, you ask? Well, they don't offer many consumer protections, and of course, they're very expensive than with all those fees and charges that they ask for. For instance, they demand fees whether or not you use your card. You pay fees to use the ATM for lots of other things, too.

As for the protections available, if you report a stolen card within two days, you're limited to responsibility for no more than $50 of fraudulent charges. But if you take longer than that, if anyone's used the card in the meantime without your permission, you'll be on the hook for up to $500. And if you take even longer than that, youre completely responsible for everything that was on the card. That's quite unlike with credit cards where you're never liable for anything more than $50 no matter when you report loss of the card.

Well, as long as it helps you stay within budget, right? Perhaps not. One important reason why you would want to give a college student a credit card is that it would help him begin to established credit with the credit bureaus. When it comes to prepaid debit cards, there is no credit history that you get. This isn't good for students once they graduate and look for a house or job or a loan.

But prepaid debit cards certainly help young people who haven't learned their money skills yet keep from overspending and overdrawing. You can't overdraw on a debit card, and you certainly can't spend more than whats in it. A full quarter of all college students leave college with $5000 worth of credit card debt. Perhaps prepaid debit cards arent such a bad idea if they help such a tragedy from occurring.

Wall Mart is one of the biggest players in prepaid debit cards. Their card is called Student Money Card. They issue both parent and child a copy each of the card and the parent can pay close attention to what their child is doing. To activate the card, you pay about seven dollars, and you pay five dollars a month in monthly fees. If you keep more than $1000 in the card at all times, there's no monthly fee anymore. But every ATM withdrawal does cost two dollars at least.

If you believe that prepaid debit cards are right for your family, you really need to take a close look at all the choices that are available.

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