What to Watch Out For when Purchasing Disposable Credit and Gift Cards

Disposable credit cards and gift cards, also known as pre-paid or pre-denominated cards, have become very popular. These cards are usually sold by retailers, banks and major credit card companies. If you are not sure what type of gift to purchase for that special someone, these stored-value cards may be the answer.

Most gift cards now look like credit cards instead of the traditional paper certificate. You can load it with the any amount of money and give it to someone for a gift.

Disposable credit cards and gift cards can offer consumers a lot of flexibility. When purchasing a card there is no need to reveal your identity, there is no credit check and having a bank account is not required. The disposable credit card, which is usually issued by banks and major credit card companies, can be a good alternative for those consumers with less than stellar credit who do not want to apply for a credit card or tie up a large sum of money for a secured card. Keep in mind, however, that you cannot build a credit history with a disposable credit card.

The disposable credit card may also offer some security when purchasing items online. Usually the card or the card number is good for a one-time use only. The card number allows consumers to buy goods online without disclosing their personal credit card number. To do this, consumers can download an application from the financial institution's web site to use a unique card number for each transaction and set a dollar limit on that transaction.

The Better Business Bureau warns consumers that while these cards are convenient, some come with hefty fees. When you purchase the card, you will pay a fee that is based on the denomination of the card. Fees can range anywhere from $1.50 to more that $7.50 per card. Some disposable cards are loaded with other types of fees. If you receive a card, here are some fees to watch for:

• Most disposable cards expire within one to two years, although some may expire in six months. If you do not use all of the stored value and ask for a check to close the account, many institutions will charge as much as $15 for a "closure fee."
• Some disposable cards allow ATM access, but you will be charged a fee. If you use the card at an ATM not owned by the bank that issued the card, it could cost you an additional fee
• Some banks will charge a monthly service fee if you do not spend the stored value within six months.

When shopping for a disposable card, the BBB advises consumers to shop around to avoid paying a high fee. To avoid fees for expired cards use the card as quickly as possible and do not use an ATM. If you want cash from the card, buy an inexpensive item and ask for extra cash back.

Smart consumers know how to select reputable businesses and carefully steer clear of enticing "too good to be true" offers. Consumers should always check a company's reliability report with the BBB BEFORE doing business with them.

This report is general in nature and not intended as a reliability report on any company, service or product.