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Many people are discovering the advantages of using reloadable prepaid cards as an alternative to credit cards. These cards typically look like a credit card--they can have the same brand, like Visa, MasterCard, American Express and Discover, and can be used at locations that accept credit cards. However, while credit cards are a "buy now and pay later" option, prepaid cards work by "paying now and buying later."

Many consumers are finding that this latter option can be an optimal way to pay with plastic without overspending. Prepaid cards can help manage finances, pay bills, pay for online purchases without worrying about a credit card number being stolen, give children allowances or have a payment option that doesn't require a credit check. 

However, prepaid cards have historically been a complex product that may be difficult for the average consumer to understand. Not only are there dozens of prepaid cards to choose from, but there are also 15 different types of prepaid fees that cardholders should understand when they use their cards.

To help explain how prepaid cards work and how to be smart when shopping for them, American Express and Consumer Action, a nonprofit organization focusing on financial education, have teamed up to produce a free educational series about prepaid cards.

"The prepaid reloadable card industry has historically been laden with hidden fees and confusing terms, but new competition is beginning to change that," said Alpesh Chokshi, president, Global Payment Options, American Express in a press release.

"Competition in the prepaid card industry has brought more 'fee lite' card options," said Ken McEldowney, Consumer Action executive director, in a press release. "But finding the right card is still a challenge. Our new project aims to help consumers compare card offerings and make an intelligent choice about which prepaid card to use."

"We're excited to offer consumers a one-stop shop of resources that will help them find the prepaid card that's right for them," said Chokshi.

The series includes two brochures and two videos. The first brochure, entitled "Prepaid Cards: An alternative to credit and debit cards" is a guide that explains what a prepaid card is and how it works. It examines the pros and cons for going with a prepaid card as a form of payment. It also gives advice on choosing the appropriate card for your individual needs and how to successfully manage a prepaid account.

The second brochure is called "Questions and Answers about Choosing and Using Prepaid Cards." It examines common issues consumers have with understanding how to use a prepaid card, including loading and using a card, prepaid card costs, policies and protections and card management.

Both brochures are available in English, Korean, Spanish and Vietnamese. They will soon be published in Chinese. The brochures are available free online through Consumer's Action website. Individuals, non-profit organizations and groups involved in community educational work may also order paper versions of the brochures for free through the website.

In addition, Consumer Action and American Express have produced two short English language educational videos about prepaid cards. "Reloadable Prepaid Cards" gives a short overview of prepaid cards and how they work, explaining how they're different from both credit and debit cards. The video also discusses their advantages and disadvantages. "Choosing and Managing a Reloadable Prepaid Card" aims to help consumers understand how to choose the card that's best for them by presenting ways to narrow down their card options, reduce or avoid fees and better manage their cards.

Both videos are available through the partners' YouTube Channels at www.youtube.com/consumeractionvideos and www.youtube.com/americanexpress. Community groups may request copies on DVD.