credit card

What's a low-income family to do when their credit card rates get hiked? Prepaid credit cards, once solely marketed to low-income consumers, have become trendy in a recovering economy where everyone is trying to tighten their purse strings.

But along with their popularity come new fees and charges that will affect not only the wealthier consumers who can afford to compare credit cards and pay premium rates, but also budget-conscious cardholders who rely on prepaid credit cards to stay within budget and avoid hefty interest charges.

New debit and credit card rules may mean steeper fees

According to an Associated Press report, a new rule about to be imposed on debit card issuers in July will save retailers from the exorbitant prices they've been paying every time a card gets swiped. While merchants may be ecstatic, banks are less than thrilled with this change, and are likely to attempt to recoup lost debit card earnings elsewhere. That likely will mean new charges for customers who use debit cards and prepaid credit cards.

Higher rates spell trouble for low-income cardholders

Prepaid credit cards have been a lifesaver for families whose credit scores plummeted during the recession--and, long before that, for low-income Americans who used the reloadable cards as a simple way to budget. Unlike the best credit card deals, prepaid credit cards come at a price, but it's one that has always been worthwhile for consumers who need to curb their spending and don't have the money or desire to pay high interest rates.

Fee cap may be delayed

To protect low-income users from fee hikes, the cap on merchant fees includes an exemption for prepaid credit cards, but that may take up to a year to come into play, reports the Associated Press. About 70 percent of prepaid card users earn less than $45,000 a year, and prepaid card fees are already straining the financial capacity of many consumers. Higher rates may be untenable for individuals who are already struggling to make ends meet.