Prepaid Debit Card New Kid on the Campus Block

Colleges have imposed stricter campus credit card marketing to protect their students from piling up insurmountable debts.  However, there is a new card on the block with its own set of issues: the student debit card.

Replacing Credit Cards in Campus

This fall, prepaid debit cards for students are replacing credit cards on campus.  Prepaid debit cards are not tied to a checking account.  Except for this variation, they are similar to regular debit cards.  Prepaid debit card issuers include Wal-Mart Stores and Bancorp.  These are the most aggressive companies pushing for the prepaid debit cards in campus.

The prepaid debit cards offer little protection for consumers.  They have enormous fees and card owners are charged for variety of reasons including lack of transaction of the card.

The prepaid card also has lots of handicap for the owner compared to regular credit card in terms of protection. If the card is stolen, owners will be liable for $50 unauthorized purchases if reported within 48 hours.  If card owners took more than two day to 60 days to report a stolen prepaid debit card, then they could be held liable for up to $500 of unauthorized purchases.  

After 60 days of unreported card loss, the owner of the card will lose his or her entire balance.  They will also be charged a separate $50 penalty for the lost plastic card.

The big drawback of prepaid debit card is they are not considered lines of credit. So, students will not improve their credit history which could be very helpful in finding student loans or student housing loans.

Advantages of Prepaid Cards

The good thing about prepaid debit card is that students will not overdraw their accounts.  Therefore, prepaid debit cards help students stay away from indebtedness which is a real danger when holding a credit card.  

According to a study conducted last year, the average college graduate will carry $2748 in credit card loans.  The student lender Nellie Mae estimates that one in very four students that graduate will have a $5000 credit card debt.  

Prepaid debit cards make their surge at the campus scene as more school administrators restrict credit card marketing.  The restrictions are designed to protect students from runaway debts.  In some big universities such as the University of South Carolina, Georgia Institute, and Tulane University, credit card companies are forbidden to solicit in their campuses.

On the other hand, financial services are still allowed to advertise student checking accounts and prepaid debit cards.  Aside from the usual promotional gimmicks and campaigns, prepaid debit card providers increasingly use new technology to promote their brand.

Prepaid debit cards are now being promoted through the Internet’s social networking sites as these websites have huge college student memberships.