Consumers have been turned off of the idea of credit cards since the beginning of the economic downturn in 2008. A report released by Javelin Strategy and Research at the beginning of September showed that more Americans were beginning to favor prepaid cards over debit and credit, but experts now warn that there may be loopholes in these seemingly safer methods of payment.
A recent study by Consumers Union found the terms and conditions of 19 different prepaid cards included multiple high fees, according to CNN. They may also come with activation, maintenance and withdrawal fees ranging from a $2.95 to $9.95 depending on the issuer.
In addition to these costs, prepaid cards came with less protection than both debit and credit cards. When individuals lost their prepaid cards, and they were used for fraudulent transactions, cardholders received little protection from issuers. Experts remind consumers that most prepaid cards are not FDIC insured.
Credit cards may seem like a bigger risk, but individuals who use them responsibly can avoid debt by reading the terms and conditions prior to applying.