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5 downsides to prepaid debit cards

The downside of prepaid debit cards
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With celebrities hawking prepaid debit cards these days, it's easy to be swayed by hype.

Witness the cards' ballooning growth. By 2013, the prepaid card market is set to more than double from $330 billion in 2009, according to Mercator Advisory Group near Boston.

But these cards have weak consumer protections, according to a Consumers Union report on prepaid cards. Some have extra fees. Others have come and gone (witness the Kardashian Kard). And users can have difficulty building a credit history.

"It's hard finding all the fee information," says Jean Ann Fox, director of financial services at the Consumer Federation of America.

Prepaid debit cards are reloadable and work much like regular debit cards. According to Consumers Union, their target is the unbanked, or the growing number of low-income consumers who don't have a bank account.

Even so, there are benefits. Some people use prepaid debit cards to stick to a budget or dish out money to kids at college. They also make sense for people who are concerned about identity theft. "They limit your exposure," says Ben Jackson, a senior analyst at Mercator Advisory Group.

But before buying, follow these pointers on what to consider.


 

 

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