Jan 05, 2011 – Total dollar figures loaded annually on prepaid debit cards are fast approaching the $500 billion mark. As a financial tool, the prepaid card has earned its place among bank debit cards, credit cards and paper checks and doesn’t appear to be losing ground anytime soon. Remarkably, there is still a large portion of the population that doesn’t understand how prepaid cards work beyond that of a merchant gift card. Let us fill you in.

Let’s focus on General Purpose Reloadable (GPR) prepaid cards for the time being and leave the merchant gift cards on the table for now. First of all, GPR prepaid cards are just that, “prepaid”. That is, you load money in your pocket or from a check directly onto your prepaid card of choice. There is no loan or “credit” given from the issuer of the prepaid card. One similarity that does occur between prepaid and credit cards is the “branding” of the card. Almost all cards are network branded by Discover, American Express, MasterCard or Visa and adhere to many of the same rules and procedures set by these four companies. Prepaid debit cards function very similarly to traditional bank debit cards in that once the card is swiped, the amount is deducted immediately from your account balance. As with credit cards, network branded prepaid cards can be used anywhere that accepts the brand.

One prepaid advantage many customers jump on is the fact that prepaid cards usually require no credit check or qualifying to get the card. Just fill out a simple one page form with some basic information and assuming you have a valid social security number, you are good to go. Using a prepaid card cannot enhance or diminish your fico credit scores, although in some cases, alternative credit reporting can be done. Depending on the card, there are a variety of loading and reloading methods available to consumers wishing to increase their available balance. Some of these methods include – direct deposit, cash load, card-to-card money transfer, wire transfer or bank transfer.

If you want the convenience of using a plastic card, but dislike increasing your debt, interest and monthly payments, then prepaid debit cards may be your cup of tea. Keep in mind that as with any financial tool, there are costs of doing business associated with prepaid products. Always review each product’s terms and conditions regarding usage and fees. There are a plentiful variety of cards available, as well as resources to help you choose the right prepaid card for you.