Is a prepaid card right for you?

This post comes from Miranda Marquit at partner blog Bargaineering.

In recent months, there's been a lot of discussion about prepaid debit cards. From the introduction of Suze Orman's prepaid debit card to suggestions that you don't need a bank account if you have a prepaid card, to a general push by issuers to encourage parents to use prepaid cards as learning tools, it seems like prepaid debit is everywhere.

But what is prepaid debit? And is it really a good idea?

The basics

A prepaid debit card is one that you can load up with funds and use as a credit or debit card. These cards usually come emblazoned with the logo of a payment processor, like Visa, MasterCard or American Express, and can be used wherever the logo is accepted. A prepaid debit card doesn't need to be attached to a bank account. Many prepaid debit cards also allow for direct deposit, so your paycheck can be deposited onto the card automatically.

When you use a prepaid debit card for a transaction, it works like any other plastic method of payment. However, the money comes from the funds associated with the card. You can't spend more than you have. Prepaid debit offers the convenience of a credit card without the debt, and without the need for a bank account.

The drawbacks

Prepaid debit is being touted as a way to teach kids the ways of plastic, and as a way to conveniently manage finances without debt and without the need for a bank.

However, the costs of prepaid debit cards can be quite high. Many prepaid debit cards include the following fees:

• Account opening fee.
• Fee to load the card.
• ATM fees (including to check your balance).
• Inactivity fee if you don't use the card.
• Monthly fee just for having the card.
• Fee when you buy a prepaid debit card at a retailer.

These fees start to add up quickly. The good news, though, is that there are some prepaid debit cards with relatively low fees. Wal-Mart's MoneyCard prepaid card, the American Express prepaid card and the UPside Visa all feature no monthly or annual fees, or very low monthly fees if you load a certain minimum each month. If you shop around, it's possible to find good deals on prepaid debit cards, and these cards work well if you can avoid fees.

Ideal for the unbanked

Prepaid cards are being marketed as an alternative to opening an account with the big banks and paying their big account fees. However, many prepaid debit cards end up charging more each month than an account fee at a bank does. Plus, there are still plenty of banks that offer free checking and other fee-free banking services.

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In reality, prepaid debit cards are most suited for those who are "unbanked." This is a segment of the population that can't qualify for a bank account, whether it's because of a certain financial situation, or because a ChexSystems report or some other consumer report disqualifies them. If you can't get a bank account, compare the cost of prepaid debit with what you are paying to use check-cashing places for your paychecks. You might find that you can save money with a prepaid debit card.

For most consumers with the ability to use a bank account, prepaid debit probably isn't the way to go. Some of the low-cost or free options might be attractive for those who want additional flexibility and convenience in family finances, but, for the most part, prepaid debit is a poor substitute for fee-free banking.

More from Bargaineering and MSN Money:

• Pros and cons of credit cards
• Dave Ramsey's 7 baby steps
• 15 low-cost weekend activities without leaving home
• How to avoid new bank fees
• How to beat annoying bank fees
• Calculator: Is your budget in balance?