What are the Pro's and Con's of Prepaid Debit Cards?

Prepaid debit cards became popular in the 1990's as Credit Card Company's realized that a good chunk of the U.S. population was not able to qualify for many of their credit cards. There were numerous defaults on the outstanding balances among the ones who did qualify for a credit card, and the card companies started incurring losses due to bankruptcy of many card holders. This problem was at first addressed by issuing secured cards, which involved having a credit line that was "collateralized" by an equal sum of money deposited with the credit card bank. During the first few years the secured card's credit line was set at 100% of the savings on deposit. Once an acceptable payment history was established by the customer, the bank would gradually increase the credit beyond the savings total - sometimes up to 200% of the deposit. In this manner the bank was able to help the credit card customer begin a stable credit history that might otherwise not qualify, and still limit their ultimate losses should the customer default.

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Prepaid debit cards began as a variation of secured credit cards where the funds were deposited directly onto a Visa or MasterCard prepaid debit card either at a merchant location or online with a bank which marketed the products. These products functioned just like a prepaid phone card and essentially just converted paper currency into electronic currency accessed via a plastic card. Prepaid debit card credit lines would always be set at the amount deposited and would come down with purchases.

The benefits of prepaid debit cards are many.
They are safer than carrying cash.
They are used all over the world due to Visa and MasterCard merchant acceptance.
With a prepaid card you don't have to worry about paying a credit card bill or going into debt.
Anyone above 18 can apply for it, and will be accepted even without a credit history.
It is easy to reload any amount of money online, over the phone or at any ATM worldwide.

The disadvantages include the fact that you don't have the luxury of using a credit card bank's funds for 25 days for free (but you could also look at that as an advantage, too). Another is if the card is lost or stolen Visa and MasterCard have very stringent notification requirements than with a credit card.

On the whole the advantages of prepaid debit cards usually outweigh the disadvantages - especially for those who cannot get credit cards due bad credit history or lack of it.