Cash is less common these days. In fact, you can’t make certain types of transactions if you don’t have some type of plastic card – a debit card, credit card, or prepaid card. If you’re looking for a way to keep your transactions electronic after debt settlement, weigh these options carefully. Not all plastic cards are created the same.
How to Access your Money
Debit cards are linked to a bank account that you can also write checks against. You can swipe your debit card to make a purchase, use it to make purchases online by entering your debit card number, or withdraw cash from the ATM.
A credit card is used to access a credit limit that your credit card issuer has extended to you. When you use a credit card, you’re not spending your money. Instead, you spend the credit card issuer’s money. You have a certain amount of time to pay back the money you’ve borrowed to avoid paying interest.
Prepaid cards are similar to debit cards in that these cards are typically used to access cash in an account, but it’s not customary to have checks with a prepaid account.
Some debit cards have a fee for making PIN-based transactions. You may be able to avoid this fee if you use your debit card as a credit card, in other words you sign for the purchase instead of using your PIN. You can also face ATM withdrawal fees from your bank as well as the bank that owns the ATM. The checking account linked to your debit card may also have fees, like a monthly or annual account fee or a fee for overdrafting your bank account.
Credit cards typically come with several fees, such as an annual fee charged each year just for having your credit card, a late fee when you pay your minimum payment after the due date and a balance transfer fee when you move a balance from another card.
Prepaid cards also usually charge fees. Some prepaid cards have monthly account maintenance fees, fees to reload your account, fees to check your balance, fees to load money onto your card and fees to withdraw money from an ATM.
Type of Credit History Required to Get an Account
Banks don’t usually check your credit history as prerequisite to opening a checking account, but they may review your ChexSystems history. ChexSystems is a firm that collects your checking account history. If you’ve written bad checks or have a delinquency with a bank, you may be in ChexSystems and you’ll likely have problems getting a checking account and debit card.
Credit card issuers review your credit history before they give you a credit card. If you have a bad credit history, which is common after debt settlement, you may have a hard time getting a new credit card.
One of the biggest benefits of a prepaid card is that you don’t have to have a great record with ChexSystems or with the credit bureaus to be approved. Prepaid cards are often the only solution for people who’ve recently gone through debt settlement and can’t get a debit card or credit card.