Prepaid credit cards can take you for a ride

Prepaid credit cards are expensive, but they sound like a useful tool for people who cannot get a regular credit card (see our previous entry: Prepaid Credit Cards Not a Good Deal).

Turns out that some cards have a way of really taking your money. In addition to monthly fees and/or fees for every deposit, they let you charge more than you have on deposit and then hit you with “overdraft” fees and interest. This can really mount up One company charges $15 for every overdraft over $10.

Another way to rack up charges is to borrow the money you lose to load the card, perhaps with a payday loan. This can lead to a vicious circle of interest and charges. The Wall Street Journal reported that one customer racked up $1,400 of such charges when he borrowed $400 to load his prepaid credit card.

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