Credit is a way of life in America. Love it or hate it but you will have to deal with it. According to the Federal Reserve Board, the decrease in the Household Debt Service Ratio (DSR) and Financial Obligations Ratio (FOR) due to the ‘credit crunch’ has been immaterial. DSR is a calculation of the ratio of debt payments to disposable income. FOR is the DSR plus expenses such as auto payments, rent, homeowners insurance and property taxes. This means that although credit is harder to come by due to the recession, the American lifestyle has not changed. Didn’t I tell you? In the first quarter of 2009, the DSR stood at 13.48 and FOR at 18.50 and 17.31 for renters and homeowners, respectively. Consumer debt, with credit card debt accounting for a large percentage, stands at 6.02 of FOR.

Fortunately and unfortunately, credit card companies are decreasing credit limits, colourful pre-approved letters in the mail are harder to come by, and the likelihood of negotiating a lower APR on your current card is as good as your chances of winning the mega million. Also, in addition to the many benefits to the consumer of the Credit Cardholders’ Bill of Rights, credit extenders will counter with higher introductory rates and ultimately less availability of credit.  Hence, many Americans have sought alternatives to credit cards, at least until the good old days of abundant credit rolls around again. The alternative that I wish to expound upon is prepaid debit cards.   

Prepaid debit cards are a viable option for many segments of Americans. There is the low-income population with low credit or short credit histories. Then, there is the group with good credit but adopting a debt-free lifestyle or at least a lower DSR/FOS. College students and those under 18 years will be limited by the new legislation; hence a prepaid debit card will serve as a practicable option.

There are three popular cards on the market: the RUSH card, Account Now, and Pay-O-Matic. Your choice of card largely depends on the frequency of use, travel, primary purpose, management preference, access preference, budget, and aesthetic fetish.

If you plan on using your card monthly then you do not have to be concerned with inactivity fees but if you will not maintain consistence usage, you will be better off with the RUSH or Account Now which charges no inactivity fees while Pay-O-Matic charges $4.95 every six months. All cards charge for currency conversion, international ATM withdrawals and purchases. RUSH charges the lowest among the three with a $1.00 charge for an ATM withdrawal, 2% of transaction for currency, and $1.00 for purchases using your pin and free with a signature internationally. If your main intent is building credit then RUSH and Account Now will serve you well as both report your positive bills payment to a credit agency. If you are looking for a simply card to pay bills online securely, then Account Now offers free bill pay enrolment and transactions. If you are looking for a card primarily to direct deposit your pay check then Pay-O-Matic will be a good choice and offers the lowest monthly maintenance fee of $6.95. Be aware, however, of the many associated convenience fees.

The three companies offer various means of managing your account. All charge fees as high as $3.00 for paper statement so old-schoolers who suffer from paper attachment, consider yourself warned! Online account management is free across the board; Pay-O-Matic is the sole provider of free live customer service and RUSH offers text alerts. You may choose to deposit and withdraw your money at an ATM, through a bank teller (‘cash advance’), or online. The RUSH card has the lowest ATM transaction fees (?). Also consider the usage limits of each card. Pay-O-Matic seems to be the most restrictive with a $500 daily withdrawal limit. Lastly, if you are inclined to stunnin’, then RUSH offers a blinged-out design in black and purple and a phat ® design for da ladies. 

The current economic and legislative realities make it necessary for Americans to search out alternative plastics. Prepaid debit cards are a practical option but each card has its benefits and drawbacks. In the end, your choice of card will depend on your needs and lifestyle. Are you comfortable managing your money online? Do you need to build your credit? How often do you travel? How do you want to access your money? Answering questions like these, along with thorough research, will lead you to the right card for you.