Prepaid credit cards have traditionally targeted people with bad credit, however, in recent years as fees have come down, they have become increasingly popular as an alternative to credit cards among college students, parents of teens, and other consumers.
Prepaid credit cards offer the convenience of having a credit card when making online purchases or making plane, hotel, or car reservations. Also known as stored-value cards, prepaid credit cards basically function like a debit card, with the one major difference that they are not linked to a bank account. Cardholders simply load money directly onto the card.
Many prepaid credit cards come with numerous, obscure and confusing fees, so check terms carefully before applying for a prepaid card. To avoid nasty surprises, here are our picks for two low-cost, almost fee-free prepaid credit cards for 2010.
The Mango Prepaid Credit Card is one of a new breed of prepaid credit cards, which is as close to a free prepaid credit card as you can get. The fee structure is fairly easy and simple to understand, and for cardholders who load more than $500 into their account each month, the monthly fee (otherwise a reasonable $5) is waived.
Unlike many other prepaid credit cards, the Mango MasterCard Prepaid doesn’t charge cardholders a multitude of fees. There is no activation fees or transaction fees, you can get balances and track transactions for free on your mobile phone. Loading money into the account is free as long as it is via a bank account, online, or via direct deposit. If you load cash with select retailers, there is a $4.95 fee. There is also a $2 fee for cash withdrawal in addition to the ATM fees.
Like for other prepaid credit cards, even people with bad credit or no credit history can be accepted for the Mango Prepaid Card. A potential drawback of the card is that all card services are electronic or happen online. To really benefit from this card, you must be comfortable with receiving electronic statements and checking your balances online or via a mobile phone.
Backed by one of the largest credit card issuers, the Capital One prepaid card for people with bad credit offers similar terms and convenience as the Mango card. The card setup fee is a modest $4.95, and it is refunded for cardholders who make their first direct deposit within 60 days of card activity. The monthly maintenance fee is $4.95 per month, and there are no transaction fees, and no card loading fees for direct deposits.
This card does come with several types of fees you need to be aware of: cardholders pay $2.00 for ATM withdrawals (in addition to the bank ATM fees), $5.95 for loading cash at retailers, and $2.00 for customer service calls involving a line agent (automated customer service calls are free. Card balances can be checked for free online, but to get a paper copy of your transaction history by mail, the fee is $1.95 for each month it is requested.
See here for prepaid credit cards popular among parents of teens and tweens.