5 prepaid debit card pitfalls to avoid

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Credit score atrophy
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One of the big reasons that demand for prepaid debit cards has exploded is that you don't need to undergo a credit check to get one, and no matter what you do with one, it's unlikely to impact your score negatively, Feltner says.

"The value proposition of prepaid cards is that you can get it with a blemished credit history, and that's because they don't have to do credit underwriting," Feltner says. "As a result, they don't report to the credit agencies."

That may sound good, but it works the other way, too. Credit scores measure how well you use credit, so for those looking to improve their credit scores, not applying for and using credit products at all can result in slow progress toward a goal of establishing credit.

That's not a big deal for those who have outstanding mortgages, car loans, student loans or use credit cards at least occasionally, he says. But McBride says that if you're looking for a way to boost your credit score, you may be better off using a secured credit card instead.



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