5 prepaid debit card pitfalls to avoid

Debit Cards » Best Prepaid Debit Cards » 5 Prepaid Debit Card Pitfalls To Avoid

Inactivity fees and deactivation
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Prepaid debit cards are meant to be used. One of the biggest ways prepaid card providers make money is through the swipe fees that merchants pay banks to process debit transactions. If you're not swiping, the card company isn't making any money.

Maybe that's why 29 percent of the prepaid cards surveyed in Bankrate's annual survey have some kind of inactivity fee that slowly draws down a cardholder's balance after a certain period of time.

That's not a big deal if you're getting the card to use as a replacement for a checking account. But if you plan to use it occasionally for vacations or online shopping, inactivity fees, which ranged as high as $5.95 per month in our survey, can add up quickly.

Many of the cards Bankrate surveyed shut down cards after a period of time, ranging from 90 days to five months. Once that happens, cardholders may have to contact the prepaid debit card provider to receive a check for their remaining balance.

If you plan to use a card occasionally, it's best to select one that won't punish you for doing so, McBride says.

"If you give consideration to how you're going to use the card, you can then select an offer that really complements your intended usage to minimize your fees," he says.



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