Prepaid credit cards stop working when consumers use up all the funds on them through purchases and credit card fees, reports Consumer.gov. Unlike standard credit and debit cards, prepaid credit cards only work when users load money on them, states LaToya Irby for About.com.
Prepaid credit cards are attractive to those who do not have a bank account, have poor credit history, want to control their spending or are concerned about the security of standard credit cards, according to Justin Pritchard for About.com. However, the disadvantages of prepaid credit cards include a lack of consumer protection, inability to build credit and inability to save money. Additionally, prepaid credit cards typically come with numerous fees, including activation fees, monthly maintenance fees, transaction fees, reloading fees and fees for withdrawing funds from an ATM. Some prepaid credit card companies also charge extra for checking the card balance or talking to a customer service representative.
Because prepaid credit cards are not covered by the Credit Card Accountability, Responsibility and Disclosure, or CARD Act, the quality of service and fee structure varies greatly among companies that offer prepaid credit cards, reports Daniel Bortz for U.S. News & World Report. For most people who are eligible for them, standard credit cards and checking accounts are less expensive and safer. Consumers acquiring prepaid credit cards should shop around and compare fees and services.