Not many people know that payment card options exist outside the traditional debit and credit cards that are commonly advertised by banks. It may feel inevitable that you’ll need to get one or the other — after all, how else will you do things like online shop or book a flight? For those who don’t qualify for a credit card or simply don’t want one, a prepaid card can be a solution.
A prepaid card is a banking product that is very specific to a customer’s needs. Teenagers, individuals with a preference against banking, and those with bad credit will find that prepaid cards come with great selling points. A prepaid card is a payment card loaded with money by you or someone else. If you’re in the market for a prepaid card you can use on a consistent basis, you’ll want to make sure you buy a reloadable one. While prepaid debit cards have many of the markings of credit cards, specifically a card number, signature strip and company branding, they act more like debit cards. Prepaid cards don’t require cardholders to open a bank account, nor do cardholders need a line of credit. The cardholder chooses the dollar amount to load the card and once a purchase is made, the amount is deducted from the balance immediately. Prepaid cards can be used wherever Visa, MasterCard, Discover, and American Express are accepted.
In what circumstances are prepaid cards used?
A prepaid card can come in handy for a variety of circumstances:
- You can load the card with a certain amount of money and keep it in your wallet to use whenever you’d like or in cases of an emergency.
- There are no strings attached, so prepaid cards might be a good fit if you’re hesitant to sign up for a credit card, would rather not deal with banks, or don’t want to go through the effort of applying for a debit card and setting up a checking account.
- Often, prepaid cards are given as gift cards. Every time you walk into a chain drugstore, you most likely pass the gift cards section. The MasterCard and Visa cards you see on display are actually prepaid cards of different dollar amounts dressed up in flashy packaging for gift giving.
- If you have children, you can choose to give them their allowances with prepaid cards you continually load with cash.
What are the other uses of a prepaid card?
Prepaid cards can be the ultimate work-around for those in difficult money situations. For instance, say a teenager saves up for an online purchase but doesn’t want the hassle of asking their parents for help ordering. By loading a prepaid card with money, they can order online independently (this tip works for everyone who wants to online shop without the means to do so). A prepaid card can be parent-friendly too. Parents can use them to introduce their teenage children to the concept of financial responsibility without giving them the option to cave to impulse and spend exorbitantly with a first credit card. Finally, individuals with poor credit are also great candidates for prepaid cards since they most likely don’t qualify for an actual credit card. However, prepaid cards aren’t the tools if you intention is to rebuild credit, as they are not tracked by credit bureaus. To do that, secured credit cards are a better option.
What else you should know?
You can reload your card by transferring money from a bank account, financial institution, PayPal account, reloading in a retail store like Walmart or Walgreens, or having your employer direct deposit your paycheck to the card. Prepaid cards are not all made equal, and some offer more features than others. Credit card issuers make money from reloadable card fees, which can be heavy. Fees include:
- Monthly fee
- ATM withdrawal
- ATM balance inquiry
- Transaction fee
- ATM withdrawal decline
- Paper statements
- Replacement card
- International currency conversion fee
For this reason, you may want to look into opening a checking account. If you feel prepaid cards are the right option for, these four top-rated prepaid cards have a lot to offer and are recommended by MyBankTracker analyst, Simon Zhen. For more information, visit our prepaid credit card page.
1. Bluebird by American Express and Walmart
This card has no activation, maintenance, or overdraft fees, and no minimum balance. Bluebird also comes with free customer service and card replacements, free withdrawals from MoneyPass ATMs if you use direct deposit with your card, and 50 pre-authorized checks for free.
If you don’t use direct deposit with your card or make a withdrawal from an out-of-network ATM, each withdrawal costs $2. Load your card for free at Walmart or through a “Vanilla Reload Pack” which costs $3.95, and bask in the benefits that come with the card, which include roadside assistance, Global Assist and purchase protection.
2. American Express Serve®
The American Express Serve® card is one of the lowest-fee prepaid cards out there. The $1 monthly fee that is waived if you load $500 to your card monthly, or have direct deposit. Additionally, cash can be loaded for free at 7-11 and CVS stores, and withdrawn for free at MoneyPass ATMs.
The card even allows cardholders to set up sub accounts (such as for kids) and offers the ability to set spending limits and ATM restrictions so the cardholder is truly in control. Serve also comes with purchase protection and mobile deposit — it’s a win all around.
3. BB&T Money Account
The BB&T Money Account card is great for cardholders who intend on using their prepaid card frequently as their primary currency. There are three fees: an out-of-network fee for $2.50, an international ATM fee for $5, and a monthly fee of $5. Aside from those fees, you couldn’t ask for a more simple prepaid card.
Withdrawals can be made for free at BB&T ATMs, deposits can be made for free by visiting a BB&T bank branch, and you also receive free reloads on cash deposits, government-issued checks, and BB&T checks. If you sign up for direct deposit, your monthly fee is reduced to $3 and will also waive the fee for cashing checks outside the bank so you never have to be charged a fee on your paycheck. In fact, BB&T also offers a version of this prepaid card for young adults between 18 and 21 years, with a lowered monthly fee of $3.
4. Chase Liquid
Would you be willing to pay $4.95 each month for wider prepaid card parameters? If so, Chase Liquid is for you. You can deposit all checks for free and the Chase QuickDeposit mobile app also allows cardholders to deposit checks merely by snapping a picture with their phone.
Free withdrawals can be made at any and all Chase ATMs, and there are no activation fees. Another perk is the mobile and text banking feature that allow cardholders to track their balance.