Reloadable Credit Cards - Better Than Checking Accounts?

Consumers have been using prepaid credit cards for years as gift cards or in order to set aside money for a specific use.  Now, reloadable credit cards offer the same advantages with so much more flexibility.  They stand a chance of becoming the way we manage all of our money in the future.

Consider the advantages:

  • No credit check
  • No overdraft fees (although check the account's specific Terms of Service)
  • An opportunity to establish or rebuild credit with some reloadable credit cards
  • Full banking services like bill payment and online account management
  • No late fees
Have you ever been hit with an absurd amount of fees on your checking account?

Maybe you made one small, financial mistake and wrote a check for the wrong amount or a check given to you for deposit was no good.  Suddenly, before you can stop the flood of other transactions on your account, you are hit with fees of hundreds of dollars.  That kind of unexpected expense can wipe you out for a month or more.

Or your balance slips below the minimum amount required to keep your checking account from being charged a monthly service fee.  Now you are losing $5 or more every month for an account you had in place for years.

Sick of those fees, we start looking for options.  That is one way reloadable credit cards are making their mark in the area of personal finance.

These cards have been enhanced with a slew of banking services that mirror checking accounts.  You can have your paycheck direct deposited onto your reloadable credit card, pay your bills from the balance of your card, manage your account online, and transfer money to and from the reloadable card. 

Bill payment services on reloadable credit cards allow you to send a payment to anyone - your dentist, your children's schoo, your rent management company, even your mortgage.  The only thing you can't do is write a check to make a purchase.  Since that is the purpose of the card itself - purchases - and since check writing has significantly declined in the past several years, does this really matter?

I have written no more than one check a year for the past three years.  In each of those cases, I could have used a reloadable credit card instead.  One of these was for the purchase of my son's class ring and since we had to do this in person, I happened to have a check in my wallet and used that, but the ring company was prepared to take credit transactions.  The other two times I used a check were to pay a co-worker back for holiday gifts purchased for our boss.  I could have simply withdrawn the money from an ATM.

Think about kids today.  They are so accustomed to the internet that they arrange their friends and social events through online websites.  They have iTunes accounts and download movies off of the internet.  They have club memberships and they shop on eBay and boutique sites.  We pay them cash allowance and the areas in which they do the most financial spending are not cash based.

It's a clash of generations - the parents who are used to cash, ATMs, checks and debit cards and the teenagers who arrange their world through virtual tools.

It is highly likely that reloadable credit cards become the tool we use for managing all of our disposable income in the very near future.  Avoiding having to pay excessive checking account fees make these reloadable cards very appealing.