If you’re looking for a way to securely spend online, you may be tempted to get a prepaid debit card. But before you rush out straight away to get one, you should learn about the dangers of prepaid debit cards.

A prepaid debit card is simple enough. You load money onto them, and you use it wherever Visa and Mastercard is accepted. There’s also other benefits like fraud protection, contactless payments and, in some cases, holding multiple currencies. Let’s dig deeper into the drawbacks these cards have.

Prepaid debit card fees

Fees are a fact of life. But did you know that prepaid debit cards come with a whole suitcase of fees. You’ll pay a fee for loading up cash. You’ll pay a fee for checking your balance. You’ll pay a fee if your card is inactive for a period of time.

Here’s a potential breakdown of the fees you’ll pay:

• – Monthly fee: $0
• – Card purchase fee: $6.95
• – ATM withdrawal fee: $0 at select ATMs in Australia, $2.50 at other ATMs
• – International transaction fee: 3% of the transaction amount
• – Currency conversion fee: 3% of the transaction amount
• – Card replacement fee: $10
• – Inactivity fee: $4 per month after 12 months of no transactions

 

Don’t lose your card

Another major drawback of prepaid debit cards is security. If you’ve loaded your card with cash, and then manage to lose your card, that money is potentially already spent. Whilst these cards are covered by some protection, there’s no guarantee that you’ll get that money back.

You also have no guarantee that your money is safe if the card issuer goes bust.

Alternatives to prepaid debit cards

While there are some advantages to having a prepaid debit card in your wallet, there are other products in the market that can serve the same purpose. One solution is to use a multi-currency account and card, such as the Wise multi-currency debit card. This card is reloadable with Aussie dollars, but you can also load up to 9 different currencies too. You’ll also get access to the real exchange rate and it also features low fees. The Wise card can be linked to your bank account and is protected by the ePayments Code, so you have more security and peace of mind when using it.

Final thoughts

Prepaid debit cards might seem like a good idea, but they sure do have many drawbacks that you’re now aware of. They’re expensive, risky, and basically ineffective for your financial goals. The only real upside is the security you may get when shopping online. At the end of the day you might be better off with a regular debit card linked to your bank account.