credit cards

5 downsides to prepaid debit cards

Difficulty building credit history
4 of 7

Prepaid debit cards look like credit cards, but there's one key difference. They usually don't log your credit histories.

"Very few cards offer this service," Martindale says. "If they do, they charge unbelievable amounts."

Many card companies claim they will report your history to the credit bureaus, but don't. Others actually report to an alternative credit reporting service, such as PRBC, or Payment Reporting Builds Credit, but not to the major bureaus. "So there's little or no benefit," she says.

What's more, you're not building a relationship with a bank. "Think about the short term and the long term," Jackson says. For example, prepaid debit card companies usually don't offer additional accounts, such as savings accounts, that can help you to grow assets.

"The cards are mainly transactional tools," Jackson says.

Instead, think about getting a secured debit card. It's backed by deposits you make to a bank, and it can help you build a credit history.




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