(UPDATE: The American Express® Prepaid Card is no longer available, instead you should check out American Express Serve® Card.)
Prepaid cards have caught a lot of buzz lately. Financial institutions are continuing to push for consumers to purchase prepaid cards, and now even T-Mobile has a prepaid card of its own that’s available for consumers. With so many out there, where do some of the best prepaid cards stand in comparison to others?
Figuring out which prepaid card suits your individual needs is important when planning your financial future. Just like the type of checking account, savings account, or credit card you open can help you save money, finding the right prepaid card for your lifestyle is essential for proper financial planning.
There are dozens of prepaid cards on the market. We have found five of the best. You will notice that some cards look appealing at first glance because they are free to open, but there are other fees associated with the card. Before you make a final decision on opening a particular prepaid card account, make sure you compare the fees associated with a particular card so you don’t wind up paying more than you should.
AccountNow (Gold w/o Direct Deposit)
American Express Prepaid
Activation Free $4.95 Free, $2.95 in retail locations Free Free online, $4.95 or more at retail stores
Monthly Fee $9.95 Free $1 (waived with direct deposit, add at least $500 to account monthly, or have Isis Mobile Wallet) Free Free with $1,000 in loads or 30 qualifying purchases per month ($5.95 otherwise)
ATM Withdrawal $2.50 $2.50 Free at MoneyPass ATMs, or $2 at all other ATMs (operator fees may also apply) $2.50 Free at MoneyPass ATMs ($2.50 elsewhere)
ATM Balance Inquiry $1.50 $1.50 Free (charges may apply from ATM operator) Free online, through emails, or text ($0.50 for toll-free number, customer service agent, or ATM) Free at MoneyPass ATMs ($0.50 elsewhere)
Transaction Fee Free $1 for each transaction Free (charges may apply from ATM operator) $1 ($2 for PIN transactions) Free
ATM Withdrawal Decline $1 $1 No fee, cardholder responsible to make up difference of negative balance $1 Free
Paper Statement $1 $1 Free to view online (only available upon call request, no fee) $5.95 N/A
Replacement Card $10 $10 No fee $9.95 $4.95
Int'l Currency Conversion Fee 3% 3% 2.7% 3.5% 3%
Perks Merchant-based rewards program Merchant-based rewards program AmEx discounts, roadside assistance, advance tickets, etc. Merchant-based rewards program N/A
How do prepaid cards compare to checking accounts?
Since many prepaid cards do not charge a monthly fee, people who do not hold a lot of money in the bank may find it more appealing. The average cost for a checking account amongst the top 10 banks is $9.99.
Although prepaid cards, like the Net Spend Pay as You Go and Account Now Classic cards, do not charge monthly service fees, other charges associated with the cards can quickly add up. For instance, both of the cards mentioned charge one dollar for transaction fees. That equates to $365 a year on fees in that category alone if an average of one transaction a day is completed for holders of those types of cards.
There is hope for prepaid cards. The American Express® Prepaid Card takes the gold when compared to the other cards, and even some checking accounts. You don’t pay anything to open the card if you order it online, and there are minimal fees associated with using the card. You can check your account balance on your smart phone to avoid ATM balance inquiry fees, and you can enroll in direct deposit or deposit checks via the app for free to add more funds to your account. The monthly service fee is only one dollar if you cannot get it waived.
Prepaid card protection
How safe is your prepaid card account if it is lost or stolen? You are only held liable to pay $50 if your credit card is lost or stolen, and as long as you notify your bank within two days of losing your debit card, the same rule applies. Do similar rules apply to prepaid cards? Or is all of your money at risk if you lose your card?
Every prepaid card is built differently. The FDIC cautions consumers before opening a prepaid card account. Some are covered by consumer protection laws and regulations, while others are not. Watch out for general purpose reloadable cards, they are not required to disclose changes to the fees or terms of agreement associated with the accounts.
Payroll cards, on the other hand, are required to disclose this information. The same goes for being FDIC-insured, some prepaid cards are covered, and others are not. The FDIC insures a person’s money in the event of a bank failure. So if the money you are holding in your prepaid account is linked to a bank that is not FDIC insured, you could lose your money if the bank fails.
Checking accounts offer a lot more benefits to people when compared to prepaid cards. But if you are someone that has a bad reputation with banks, or prefers prepaid cards for any particular reason, look into one like the prepaid card offered from American Express. When choosing a prepaid card, your goal should be to prevent paying as much as possible in fees.