Posts Tagged ‘prepaid mastercard’

In the last several years, credit card fees have been getting ridiculous. That’s because the credit card companies have had free reign to charge just about anything they wanted. They’ve also been able to hide much of it from us by burying the details in long-winded fine print and legalese.

The tide is beginning to turn now though. More and more people are realizing what’s been happening to them and more and more people are starting to do something about it. One technique that can help us avoid the burden of monstrous fees is to switch off our credit cards and switch on prepaid debit cards. Let me explain.

If you’re in a position to do so, I propose you start converting all of your existing credit card spending over to prepaid debit cards. Month-by-month, phase out all of the credit card purchases until you make no more. Then (again, if you can), set up an automatic payment to your credit card, something that is higher than the minimum payment required and something that is scheduled to arrive at least a few days in advance of the billing due date. Then lock the credit card away in a drawer!

This will not only give you some peace of mind but it will also get you off the credit card fee merry-go-round. Fees you see are how these companies make their money and that, in and of itself, isn’t a bad thing. But the credit card companies stack the deck against you and manipulate you into positions where you’re actually tricked into some fees. Let’s take a case in point, the over-limit fee.

Every credit card customer has a credit limit but the companies don’t stop you from exceeding it because if they did, they wouldn’t be able to charge you an over-limit fee. But what’s really shady is that your next minimum payment will only pull you under your limit temporarily. As soon as you pay it and your finance charge is calculated, you very often go back over the limit. Then wham - another over-limit fee. it’s amazing that this practice is even legal. That would never happen with a prepaid debit card because you simply wouldn’t be allowed to spend more than what you’ve loaded to the card.

Prepaid cards don’t come with tricky monthly finance/billing cycle calculations either. These are the computations the credit card companies make to determine how much they’re going to charge you to carry your balance from one month to the next. There are actually 6 or 7 different ways these charges can be calculated and everyone is designed to yield the highest return for the company based on your spending habits.

There are also hidden interchange fees that all credit card customers pay. These are fees that are paid by the retailers for the actual transactions costs of doing business with a particular credit card company. They’re negotiated in secret and aren’t really published anywhere. But you can be sure that consumers are paying them in the form of higher prices so the retailers can cover their costs. And these represent a huge profit for the credit card companies because these fees will be paid even if you can’t pay your monthly bill.

These are just a few of the reasons why switching over to a prepaid debit card can benefit you as a consumer. Let’s face it; the credit card companies have almost all the leverage. About the only options we have left is to cut our losses and prevent them from preying on us in the future. So if you’re in a position to do so, I invite you to take a good long look at prepaid debit cards and see how they can become your sensible, more consumer-friendly alternative to credit cards.