Beware of Prepaid Credit Cards

I thought they would save me money and interest charges. That prepaid credit card that was given to me as a gift seemed like a great idea. But when I tried to pay for an old Beatles CD at an online auction, my troubles began. My payment was declined, even though I knew I had enough money on the card. So I called an 800 number on the card to check my balance. Big mistake. That call cost me $1.00 that was taken off my card!

By going to the website of the prepaid credit card, I got a lot more answers. Not only did I see the charge for the "toll free" phone call to check my balance, but there was the $1.00 charge for the rejected online purchase. Most other cards just reject a purchase without charges. I know it is my job to know the rules of using the card, but some things you just don't expect.

Well, it seems these issues are common for many of the prepaid gift and prepaid credit cards. For many, these prepaid cards have become very popular because of their convenience. Retailers and credit card companies like them a lot too, for another reason. In addition to the fees they charge, there is also a significant percent of these cards that never get used up. It is estimated that 6% to 25% of the $24.81 billion total value of prepaid cards purchased in 2006 goes unspent!

So what do you need to do? Be sure to read the fine print. Fees can vary greatly and in general, prepaid gift cards from retailers, hotels and restaurants are the best value in terms of fees, but then you are restricted to purchases from that particular business. Prepaid credit cards from the card companies are generally different and you can expect to pay a fee right off the top to cover "processing".

Fees can then be charged for simply using the card to buy something, to check your balance, for refused transactions (like me), for registering the card with a name and address so it can be used online, expensive monthly and/or annual maintenance fees, the list goes on.

And as we found out, you need to know the exact amount left on your card. If you try to use your card and don't have enough left on it, you cannot use cash or another card to pay the remaining balance. And guess what? You'll be charged a fee! But don't call to check your balance, either, or you may pay another fee like I did. Again most retailer prepaid cards don't have all these fees and charges.

Don't rule out your local bank as a place for good deals on prepaid credit cards. They often have fewer fees and are less restrictive. And don't forget that all distributors of prepaid gift and credit cards are required by law to explain what fees and charges you are subject to. Do yourself a big favor and check these out and you could save yourself a lot of money and disappointment. I did not get that Beatles CD, but I used the lesson I learned and emptied the balance of my card on a copy of a U2 CD that I have really come to like a lot.

Article Source: http://freelegalinformation.info

Paul McDermott reveals more of his hard earned lessons on prepaid credit card debt relief and finances over at Debt Relief Tips.