You Should Start Using A Prepaid Card Instead of Credit in These 7 Situations - TheStreet

NEW YORK (MainStreet) — The rise in the popularity of using prepaid cards is occurring partly, because consumers want to prevent more hackers from making purchases and stealing their identity.

As hacking becomes ubiquitous and businesses from major retailers to banks are attacked, many consumers like the ease of prepaid cards, which also helps control spending. The industry is booming, and $65 billion was loaded onto the cards in 2012, which was more than double compared to 2009, according to a 2014 Pew Charitable Trust Research Center report.

Using prepaid cards instead of credit or debit cards for daily purchases such as food trucks or parking decreases consumers’ risk of being defrauded by cyber attackers. More people are using them as the fees are declining. A recent survey conducted by Bankrate, the North Palm Beach, Fla.-based financial content company, found that 26% of 31 widely-held prepaid cards have no monthly fee and 26% will waive the monthly fee if a certain amount is loaded on the card.

“Many of the higher fee cards seen in the past have been marginalized or even discontinued, while the newer entrants often have more transparent fee structures and in many cases, avoidable fees,” said Greg McBride, CFA, chief financial analyst for

Here are seven places you should think about paying for your purchase with a prepaid card because it limits the amount of fraud which can occur.

Mobile Payments

Sending your friends money through an online or mobile app is risky. If you are going to split the cost of dinner with them, avoid using a debit card. This feature is fraught with fraud, because you are “giving a direct line to a third party into your checking account and they are free to add and remove funds as they see fit,” said Shaun Murphy, CEO of Private Giant, an Orlando, Fla.-based company who plans to launch a security app for smartphones.

When these apps are hacked, “you could wake up to an empty or negative bank account,” and restoring the balance to your account could take weeks or even months. Using a prepaid card prevents this compromise.

Travel Expenses

Using a prepaid card might be a good idea when you are traveling and need to pay for a cab or purchase train or subway tickets. If you lose the prepaid card or it gets stolen, you are only out of the money which was as available on that card, said Dave Bennett, CTO of IONU, a data security company based in Longmont, Colo. You should be able to obtain a refund if you call the issuer.

“Leave your credit cards in your hotel, so you won't have to call your credit card company, and cancel all your cards and leave yourself with no access to any money or any way to pay your hotel bill,” he said.

Online or Holiday Shopping

If you like to shop online, a prepaid card can prevent you from being a victim of a data breach especially if it a smaller, unknown retailer. Use a prepaid card and load it when you need more funds for additional purchases, said Bob Legters, chief product officer of North American retail payments for FIS, a Jacksonville, Fla. provider of banking and payments technologies. Many of the largest data breaches occurred during peak holiday seasons when millions of consumers were shopping online.

"If the merchant suffers a data breach, the consumer's exposure is limited to the balance on the prepaid card," he said.

Temporary Stores

It’s tempting to use your credit card to pay for food at a farmer’s market or a souvenir at a temporary open air market or from a sidewalk vendor, “thanks to the ubiquity of mobile Internet connections,” said Mark Parker, a senior product manager at iSheriff, a Redwood Shores, Calif. cloud security provider. said.

“These scenarios provide an excellent venue for the grifting of card information,” he said. “The consumer is left trusting a vendor that doesn’t have an actual retail location.”

Cell Phone Charging Stations

Scamming devices can be placed anywhere, even those kiosks to charge your depleted smartphone. The  convenience could cost you in the long run.

“These devices can also dump the information from your cell phone while charging,” Murphy said. “This attack method even has a cool name: juice jacking!”

Free Services or Trial Period

Companies now offer a trial period so you can try out their software or watch a free movie for a period of time. The catch is that the company still requires you to enter your credit card information. After a month, you discover that they charged you anyway and it takes eons on the phone to cancel it. When you attempt to dispute the charge with the credit card company, the web site “provides proof that you signed up for their service,” said Bennett.

“Don't you wish you could just cancel the credit card and not have to worry about all of the other ways you'll be inconvenienced if you do?” he said. “I can't tell you how often I've wished I had used a prepaid card for those things.”

Public WiFi or Computers  

Avoid making purchases with a credit or debit card on public computers or WiFi, including libraries, Internet cafes, hotels and conferences, said Craig Kunitani, COO and CTO at Security Mentor, a Pacific Grove, Calif. security awareness training provider.

Public WiFi and computers are more vulnerable to hacking because they could have malicious key loggers installed which will steal all the information you type such as your bank account and password, he said.

“Cash, traveler’s checks and prepaid cards are all good alternatives to using credit and debit cards,” Kunitani said.

If you are paying for WiFi at places you go to occasionally, such as the airport or airplane, "this would be the time to use a prepaid card," Bennett said.

Hotels are not immune to financial breaches. Massive amounts of customers’ financial and personal data were stolen at Trump Hotel Properties, The Mandarin Oriental Hotel Group and White Lodging. Hotels store other valuable data such as your movie watching habits, room service or other hotel charges you rack up, said Murply.

This type of data is compiled into a "Fullz" record of an individual and can serve to aid in identity theft such as the online authentication questions asked to gain access into your accounts, he said.

“All of this aggregated information about you sells for a few bucks on the dark web,” Murphy said. “Once your personal data is out there, it's impossible to predict how it will be used and almost impossible to protect against.”

This issue could soon be moot as more consumers adopt mobile payments, said Vince Arneja, vice president of product management at Arxan Technologies, a Bethesda, Md.-based provider of application protection solutions.

“Mobile devices will soon represent the most secure method of online payments,” he said.