The ongoing debate over whether prepaid debit cards make sense for consumers usually turns on a comparisons of costs, as my colleague Claes Bell reported in a recent Bankrate story, "Ditch Checking for a Prepaid Card?"
Experts typically say prepaid cards aren't a good idea for people who can use a bank or credit union checking account, but they can be a decent option for people who incur multiple overdraft fees or resort to check cashiers or payday loans.
Yet there's another reason why some people choose to use a prepaid card instead of checking account: A prepaid card can't be levied the way a checking account can be.
That's according to Karen Carlson, director of education and creative programs at InCharge Education Foundation, an arm of InCharge Debt Solutions, a credit counseling service in Orlando, Fla.
"I'm not seeing where a prepaid card would be better than a low-fee to no-fee debit card coming out of a checking account," Carlson says. "But I think a lot of people don't have those (accounts) because they get levied."
In other words, a prepaid card is a convenient, if unethical way to avoid paying alimony, child support, taxes, other court-ordered judgments and the like.
"There is," Carlson says, "that type of individual who can probably achieve what they need to achieve through being able to go online and do certain types of transactions where a prepaid card is going to be very attractive."
It's an aspect of the prepaid card debate that Carlson rightly suggests is too often overlooked by experts -- and financial reporters.
"A lot of the writing about unbanked people is based on the idea that there is an education problem," she observes. "They just don't know they can go to a bank! That's not it. People will do what's in their best interest, and the fact of the matter is that if you owe back child support and you have a bank account, it will be levied. And if you haven't paid your taxes and there are liens on you, the government will find you and take your money. I'm not defending these people, but (if you're in that group) you don't have much of an incentive to open a checking account and put a bunch of money in it."
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