You thought you could cut your costs and improve your debt situation by getting a prepaid credit card. As the saying goes, buyer beware. I learned some of this the hard way after I received a prepaid credit card as a gift. I tried to buy one of my favorite Beatles CD's at an online auction. I was surprised that my purchase was rejected, even though I knew the balance was enough to pay for it. The real shocker was that when I called the 800 number on the card to double check the balance, they charged me $1.00 for the call!

I opened a new window in my browser and went to the website of the prepaid credit card distributor. Following the prompts to enter my account number, I was shocked to see the reason for my shortage of funds. When my transaction didn't go through on the auction site I had been charged $1.00 by the prepaid gift card company for the failed purchase. And the reason the purchase had failed was because I had used the 800 telephone number to check my balance - and that had cost me $1.00 also. Sadly, my sought after Beatles disc was going to another home. If only had I read the fine print in the three page booklet that came with my card...

Well, it seems these issues are common for many of the prepaid gift and prepaid credit cards. For many, these prepaid cards have become very popular because of their convenience. Retailers and credit card companies like them a lot too, for another reason. In addition to the fees they charge, there is also a significant percent of these cards that never get used up. It is estimated that 6% to 25% of the $24.81 billion total value of prepaid cards purchased in 2006 goes unspent!

Are any of these cards worth it? First, make sure you read the details on the fees and charges. Gift cards from restaurants, retailers and hotels usually have no intial charge, and often no fees at all. And you can use the balance of a card on a purchase and pay the rest with some other form of payment, so you never have to leave a balance on your card. If you get a prepaid credit card from one of the credit card companies, expect to pay a processing fee right up front.

In addition to upfront fees, look out for the long list of other ways your balance gets whittled down. Things like checking your balance, refused transactions, registering your card for online purchases can all cost you money.

If you do have a prepaid credit card that has lots of these fees, what are you going to do? You cannot use the remaining balance on your card if it is less than what you owe. You could pay another fee. But don't call to get your balance either. You could be charged again! Try one of the retailer prepaid cards to avoid these unreasonable fees.

Don't rule out your local bank as a place for good deals on prepaid credit cards. They often have fewer fees and are less restrictive. And don't forget that all distributors of prepaid gift and credit cards are required by law to explain what fees and charges you are subject to. Do yourself a big favor and check these out and you could save yourself a lot of money and disappointment. I did not get that Beatles CD, but I used the lesson I learned and emptied the balance of my card on a copy of a U2 CD that I have really come to like a lot.