One great attraction about prepaid debit cards is that you don’t have to worry about interest rates. Since you are not given a credit line and you pay for your bills using the available cash you deposited, you will not incur additional APR costs.
Nevertheless, owners of debit cards must be cautious about the possible penalty and fees associated with their prepaid card use. What you thought was a $50 pair of shoes may suddenly cost you $80 or more due to the extra costs. Below you will find a list of debit card fees that you should be aware of!
Negative Balance Penalty. You can only use your debit card for payment as long as you have an available balance in your account. However, there are instances when your bill may exceed just a little over your available balance. In this case, your transaction may still be accepted but you will be charged an over limit fee. The amount of these fees vary from card to card, so make sure you read the terms of service carefully.
Decline Charge. Again, prepaid debit card holders are not allowed to overdraw. Hence, if you try to make a purchase that is way too large than your available balance, your transaction will usually be declined and you maybe penalized for just trying! Over the years, more and more debit card holders have stopped charging this fee, but its still out there! So again read over your agreement carefully.
Daily Limit Penalty. Some prepaid debit card issuers impose a limit to the amount of transactions you can make each day. Going beyond that could mean additional fees.
Inactivity Fee. Not using your debit card within a specified time period may also cost you additional charges.
Customer Service Charge. Some Issuers may not provide assistance for free. Others may provide one free live customer call each month but may charge a fee for corresponding calls (may range from $0.50-$2.00 per call) So before calling your debit card’s hotline number, check how much you will be charged.
Account Termination Penalty. Are you planning to close your account? If yes, your debit card Issuer may penalize you for terminating their service ($15 or more).
Card replacement. If you lose your debit card, there is usually a fee to ask for a replacement card.
ATM Balance Inquiry. Do you want to inquire your balance? Watch out! Checking from your nearest ATM may cost you anywhere from $0.50 to $1.00, depending on your debit card type. Most card issuers allow you to check your balance online for free.
Currency Conversion. Currency conversion rates are not just applicable to regular credit cards but to prepaid debit cards as well. Hence, before using your prepaid card abroad, check the currency conversion rate. For instance, Visa Prepaid Debit Card charges 2% while MasterCard Debit Card charges 2.95% currency conversion rate from the total amount of purchase.
Choose and Use Your Debit Card Wisely
Just as it is important to check the fine print before signing for a credit card, you also need to do some investigation when choosing a debit card. More importantly, you need to familiarize yourself with your privileges and limitations to avoid spending more on penalty and maintenance debit card fees. Even though it is far easier to get a debit card, take the extra effort to read the Terms and Conditions.
About the Author
Tara Tiemann is a credit analyst for Go-prepaid.com which has been a resource site for people who want to live debt free. If you are on a budget using prepaid debit cards,prepaid credit cards and prepaid cell phone service can save you big money!