The growing popularity of prepaid debit cards are one of the hottest trends in the banking industry. These cards offer purchasing and bill payment services to the underbanked while appealing to credit card users who wish to avoid debt.
In many ways, the latest generation of prepaid debit cards offers much of the security and convenience of credit cards. For example, the American Express for Target prepaid card comes with features such as roadside assistance, purchase protection and access to a global travel assistance hotline. In fact, a few other prepaid cards even offer modest reward programs.
Yet as far as these products have come, there are still several important features and benefits that can only be found in credit cards:
1. Chargeback Protection
Credit card users who authorize charges, but don’t receive what they paid for can file a claim with their card issuer against the merchant, while debit card users must use the legal system.
2. Rental Car Insurance
One of the most popular credit card benefits is the rental car collision damage waiver offered by nearly all credit cards. In contrast, debit cards never offer this feature, and rental car agencies will require additional paperwork from renters without a major credit card.
3. Travel Perks
The right airline or hotel credit card can offer priority service, free checked bags and even access to a business lounge. There are just a few remaining debit cards linked to traditional bank accounts that offer frequent flier miles, but even these don’t provide similar perks.
4. A Buffer Against Fraud
If a fraudulent charge is made against your credit card, you will have 25 to 55 days to report it before the bill is due. Yet when a fraudulent charge is processed against a prepaid debit card, the cardholders will immediately lose access to their funds until an investigation is concluded in their favor.
5. A Line of Credit
Even those who pay off each month’s statement balance in full have to recognize that a line of credit can come in handy in an emergency. In fact, credit cardholders can utilize their interest-free grace period to receive a short-term loan at no cost. Even if a statement balance cannot be paid in full, credit cards can be far less expensive alternatives to payday lenders and other forms of unsecured credit.
Once consumers weigh the advantages of prepaid debit cards with the inherent benefits of credit cards, they can make the best decision when it comes to paying with plastic.
Compare credit cards and prepaid debit cards on Credit.com