Prepaid debit cards are one of the most convenient ways to manage your money. They are accepted anywhere that debit cards are accepted and can be used to withdraw cash from ATMs. Prepaid debit cards are loaded with money before you can use them, so you can always keep track of your spending. They are great for the budget-conscious consumer who wants the benefits of a debit card.
What is a prepaid debit card?
A prepaid debit card is similar to a conventional debit card in that it’s used to make electronic payments. It’s linked to a payment account, such as a checking account, and you configure it to access funds when you use it to make a purchase or ATM withdrawal. Unlike a debit card, usually issued by a financial institution, such as Bank of America, a prepaid debit card can come in many forms and may be issued by a financial institution or retailer. It can also be a gift card loaded with money and associated with a payment account.
Many people select a prepaid debit card as an alternative to a conventional debit or credit card because it can provide access to funds faster, offer protection from fraud, and allow you to track spending. However, if you’re looking to switch from a credit card to a prepaid card, be aware that many prepaid cards act like credit cards and come with similar fees and terms.
How do prepaid debit cards work?
A prepaid debit card is a payment card that you load money onto before you can use it. You can think of it as a gift card for electronic use. Unlike a traditional debit card linked to your bank account or a prepaid phone card that you must carry, a prepaid debit card is safe to keep in your wallet until you use it.
The US banking system introduced prepaid cards in the 1990s, but they only became popular recently, thanks to their convenience and the way they blend the best of credit cards and debit cards. They are also paid-as-you-go cards, debit cards, and prepaid virtual debit cards.
Advantages of using a prepaid debit card
There are many advantages to using a prepaid debit card, especially compared to a traditional credit card. This type of prepaid card is also more protective of your credit score.
1. Less Risk of Debt
The first and most obvious advantage of a prepaid debit card is that it limits your spending money. You load an allotted amount onto the card before using it. If you don’t have money in the account associated with the card, you won’t be able to buy anything. This helps prevent debt, especially when combined with step 2 below.
Because you have to immediately pay for anything you buy with a prepaid debit card, the card helps promote financial accountability. If you don’t have the money to pay for something at the time of purchase, the store will not likely accept a payment plan or credit payment like they would with a credit card.
This can be great if you’re prone to buying things you can’t afford using a credit card. Similarly, a credit card may have extended payment plans or promotions that allow you to pay your bill in several installments over time – much less likely with a prepaid card.
3. Less Risk of Shoplifting
You may have noticed that stores impose a surcharge on credit card purchases. This “credit card surcharge” or “credit card fee” can range from 2.9% to 5.6%, according to the Federal Trade Commission (FTC).
The reason stores impose these fees is because of the risk they take when they accept credit cards. The store has to pay a percentage of the sale to its credit card processor, and if the transaction is fraudulent, the store will lose money either way.
Disadvantages of using a prepaid debit card
Despite the increasing popularity of prepaid debit cards, there are also several disadvantages that potential users should be aware of:
Limited access to funds
Unlike when using a prepaid credit card, when you use a prepaid debit card, you’re limited in the things you can buy. Over a month, you may run out of places where you can use the card and end up having a chunk of money locked away on it that you can’t use.
More challenging financial planning and budgeting
As we just mentioned, the restricted use of a prepaid debit card can make it harder to budget and plan for future purchases. If you load the card with a set amount of money and don’t pay attention, you could end up with several hundred dollars locked away and no way to spend it.
Because there is much competition in the prepaid debit card market, companies don’t make much money off them. So to make up for it, companies charge high fees, especially during initial purchase and activation, monthly maintenance, and ATM fees.
Difficulty resolving disputes
It is much harder to resolve a dispute with a prepaid debit card than with a credit card. With a credit card, you can contact the bank that issued the card and ask to have the charge removed. With a prepaid debit card, you are dealing with the bank that issued the card and may have to go through a complicated dispute process.
How to choose the best-prepaid debit card for you?
It’s easy to get overwhelmed when looking for the best-prepaid debit card. There are so many options out there, and it’s a product that nearly everyone needs at some point. To make it easier for you, we researched and came up with the best five prepaid debit cards available today. Using this information, you can choose the best one that suits your needs and feels confident in your decision.
Here are the best five prepaid debit cards:
1. Fintech Powered Card™ Visa Prepaid Credit Card
The Mastercard brand is no longer an outdated notion when it comes to creditworthiness. The new Fintech Powered data algorithms entirely manage Card™ Visa Prepaid Credit Card. If you have a bad credit history, you can still get a great credit card because this one crunches data from places outside the credit bureau, like your Facebook and Amazon history. The best part is that you will get a credit line based on your spending behavior!
2. Unicorn Gold Pre-Paid Card
The Unicorn Gold Pre-Paid Card is the perfect combination of a gold card and a prepaid debit card. It has all of the benefits of a gold card (discounts at hotels, restaurants, and airlines) and all the benefits of a prepaid debit card (protecting your identity and controlling your spending). It even has insurance benefits like coverage for stolen travel insurance and hotel discounts. Plus, it looks gold!
3. Amazon Prime Reloadable Prepaid Visa Credit Card
The Amazon Prime Reloadable Prepaid Visa Credit Card is an excellent choice for Amazon shoppers. It has an Amazon-branded design and comes with an instant $30 credit when you join the Amazon Prime program. The reloadable card comes with standard Visa credit card benefits, like fraud protection and liability limitations.
4. Eco Credit Card
The Eco Credit Card is the first green credit card. It has all the benefits of a standard credit card but is made with sustainably sourced wood. The wood used for the card comes from trees that have fallen, were left in the forest by homeowners, or lumber that was damaged and would have been thrown away. The card has all standard credit card benefits, like fraud protection and purchase protection.
5. Green Dot Platinum Refuel Prepaid Visa Credit Card
The Green Dot Platinum Refuel Prepaid Visa Credit Card is an excellent choice for people who want to raise their credit score or limit spending. The card has a monthly payment plan (called Refuel) that allows you to pay down your balance and save $5 in monthly fees by paying off 2% of your monthly balance. It also has standard Visa credit card benefits, like fraud protection and liability limitations.
The best-prepaid debit cards offer a variety of features, including low fees, direct deposit, ATM access, and even rewards programs. When choosing a prepaid debit card, be sure to compare the fees and consider the features that are most important to you. With so many options available, there’s sure to be a prepaid debit card that’s a perfect fit for you.The best-prepaid debit cards offer a variety of features, including low fees, direct deposit, ATM access, and even rewards programs. When choosing a prepaid debit card, be sure to compare the fees and consider the features that are most important to you. With so many options available, there’s sure to be a prepaid debit card that’s a perfect fit for you.
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