Prepaid debit cards not a good deal, but some are worse than others

Suze Orman claims that 70 million people are unbanked or “underbanked,” and they need access to the convenience of a prepaid debit card to make purchases.  So she has come up with a new prepaid debit card that she claims is lower cost than the others, and is the only card that will report activity to one of the Credit Reporting Agencies, Transunion.  She hopes (but does not promise) that this may improve your credit rating.

I agree that a debit card can be very useful for people who cannot get a credit card, but if you can get a checking account, you can probably get a regular debit card free (or close to it) from your bank.  The main advantage is that all your deposits (paychecks included) are automatically available for use with the card.  There is no need to go through the hassle and fees of a prepaid card which requires special deposits; has many fees, and requires you to deliver cash to selected retail outlets before you can use it.

If you cannot get a debit card from a standard checking account then a prepaid debit card may be worth checking out, but you can do better than the Orman card.  Fees include from $3.00 to $4.95 every time you make deposits (only at stores that take Western Union or Moneygram payments).  There is also a monthly $3 fee and a $2 fee for any withdrawals from an ATM.  That ain’t cheap!

The American Express prepaid card appears to be a better deal.  It has no monthly maintenance fee. They charge $2 for ATM withdrawals after your first free one each month, and depositing money at a retail location (they say they have 50,000 available) incurs the same approximately $4.95 charge as does the Orman Card.

There is another way to do this:  Use an American Express Gift Card. But you may need some help.  Someone you know could order a “Gift Card” for you via the previous link.  It works like a prepaid debit card, except you cannot withdraw money from an ATM.  Depending on how you do it, it could be cheaper.

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