In the very recent past, a new law came up in 2016. According to which, the prepaid cardholder is allowed to pay more than the balance in their account. Also, they are protected with an overdraft facility which permits them to make payment, even if the balance in the account is $0.
Whereas, few banks still does not have this facility. For e.g. American Express and Green Dot. But some are following these, added up with few terms and conditions. ‘Purchase Cushion’ is provided to the customers who are the qualified ones for such.
Some of the prepaid cards which have in itself the purchase cushion protection are discussed here. They allow it’s customers to overspend $10 but in a condition that the account of the borrower will have to come back to positivity within 24 hours of time, if s/he wants to avoid overdraft fee. The cards are :- PayPal Prepaid MasterCard, NetSpend Visa Prepaid Card, Brinks Prepaid MasterCard, and Ace Elite Visa Prepaid Debit Card.
A prepaid card is almost same as a debit card issued by financial institutions. In this, the prepaid cardholder input some money, above which they cannot spend. Earlier, no overdraft facility was allowed on prepaid cards, but after 2016, it was permitted till $10 and if more, then a fee has to be paid along with the over spent amount at the time of repayment. The fee charged is between $15-$20.
The federal laws say, the issuers are allowed to charge the above-mentioned fees only for some fixed time in one month. Mostly, the banks restrict their charging till 3 or 5 times a month. Well, the overdraft cushion is an optional facility which is decided by the issuer whether to permit or not.
The total amount of overdraft protection on a prepaid card solely depends upon the issuer. For e.g. Netspend’s is $10. If the account is not made positive within 24 hours, then a fee is charged. Overdraft protection benefits the user, but if the user relies on it, then it may turn problematic for him/her.
There isn’t any spending limit as such for prepaid cardholder. But, the amount imputed in it serves as it’s spending limit. Anything spend beyond that, is known as an overdraft. If the card issuer allows overdraft facility then, the borrower may use it otherwise once the balance comes down to 0, then any further transaction is declined.
The thin line of difference between credit card and prepaid card is that, prepaid cards do not allow a revolving line of credit which the credit card issuers permits. The prepaid cardholder is limited to it’s saved money, whereas the credit cardholder is allowed by it’s issuer to carry on drawing and paying back till the credit line borrowed has been over. There is no such thing as to people will need to have a checking or banking account in order to have prepaid cards but in case of credit card, one will have to have it.
There are many times, when we fall in a place where our saved money couldn’t suffice the need. In that period of time, an overdraft facility may help us get out of the unforeseen situation. This was what I have discussed in the whole write up. Probably, I could stand up to your requirement and help you. If it’s true, do not forget to add your own view in the comment box. Thank you in advance.
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