A prepaid debit card might seem like an attractive option, but here's what to know before you close out your checking account and and make the switch.

By Real Simple
Updated January 22, 2013

Back in the day—say, 2002—most checking accounts were free. Not anymore: Now nearly two-thirds of them carry a monthly maintenance fee of about $12, according to MoneyRates.com, a financial tracking site. No wonder a growing number of people are flocking to prepaid debit cards as a cheaper alternative to checking. After all, the cards can be loaded with funds (as much as $15,000 on some versions), and you can use them to make purchases and pay bills. What’s not to like?

Unfortunately, quite a bit. For one thing, you probably won’t kiss that maintenance fee good-bye. Some prepaid cards levy up to $10 a month, according to the credit-card–comparison site CardHub.com. Plus, you can get dinged $1 to $5 every time you load money onto the card or use an ATM.

Prepaid cards also tend to offer fewer consumer protections, says John Ulzheimer, the president of consumer education at SmartCredit.com, a credit-monitoring site. Unlike money in the bank, the funds you load onto a card may not be insured by the FDIC, and with some, if you lose the card, your money is gone, too.

That’s why experts suggest that you maintain a checking account. “Many prepaid cards are poor substitutes,” says Odysseas Papadimitriou, the CEO of CardHub.com. “Also, most checking accounts offer more customer-friendly features, such as free withdrawals at branch ATMs and reward programs.” And since some banks do still offer free checking (find one at Bankrate.com), if you do a little detective work, owning an account doesn’t have to cost you a thing.