A Guide to Prepaid Debit Cards

Photo by Jeff J Mitchell/Getty Images)
Photo by Jeff J Mitchell/Getty Images

Prepaid debit cards, otherwise known as general purpose reloadable cards, can be an alternative to traditional credit and debit cards. They often even look like other cards and bear many of the logos we’ve come to know — MasterCard, Discover, and Visa. But that’s where the similarities end.

What’s a prepaid debit card?

It can be used to make purchases in stores and online, receive direct deposits, pay bills online, and obtain cash at an ATM, all similar to what a debit card does, writes Consumer Reports. Unlike debit cards, though, you don’t need to have a bank account. The cards can be purchased in stores or online.

The Pros

It’s a great way to control your spending. “Perhaps the most popular use of prepaid cards is to transfer funds from parents to children and particularly college students,” writes Bankrate. If you don’t have a high income, are frequently away from home, or are looking for a way to track your children’s spending, it can be a solid option. You won’t have to go through the hassles and costs of a bank account, either — all you need is a mobile phone and a prepaid card. It’s a great way to give kids a little more financial freedom while letting you monitor it.
It can also be a substitute for a standard bank account. If you’re living in a community that may not have a ton of banking options or have had prior issues with a bank that could make it difficult to open an account, it’s definitely worth considering. There are no credit checks required for prepaid debit cards, according to Bankrate.
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The Cons

A prepaid debit card doesn’t come with the same protection that other cards can offer. If your card is lost, stolen, or used for unauthorized transactions, it could be a total loss for you. The cards can also be loaded with fees, some of which are disclosed at the point of sale. Other fees can be found listed at the issuer’s website, says Consumer Reports.

What to Consider

If you’re looking for a prepaid debit card, there are several fees you should take into consideration. Make sure to review the following: activation fees, monthly fees, point-of-sale transaction fees, cash-withdrawal fees, balance-inquiry fees, fees to receive a paper statement, fees to call customer service, bill payment fees, fees to add (also known as “load funds”), dormancy fees for not using the card, fees to get your remaining funds back when closing the account, and overdraft fees.
You can take some steps to avoid fees, but first you need to make sure you understand the different ways you can be charged. “Your costs will vary widely depending on which card you choose and how you use it, so make sure you understand those costs before selecting a card. With some cards, you might be able to reduce fees by using direct deposit to load money onto the card. You can avoid non-network ATM charges by getting cash back when making purchases and checking your balance online or over the phone,” according to Consumer Reports.
My Bank Tracker recommends opting for a checking account if you receive direct deposits — checking accounts typically offer more services for less money. But, if you’re going to go with a prepaid card, stick with a major financial institution. They’ll often offer better services, including lower fees, more ATM access, and direct deposit.
Source: Thinkstock


According to My Bank Tracker, here are a few prepaid cards worth looking into.
Chase Liquid: The first prepaid product of its kind, Chase Liquid is offered by a nationwide bank and comes with the capabilities of a checking account (it doesn’t come with checks, though.) You can use direct deposit, or you can deposit money using Chase’s nationwide ATM network, which comes at no cost. The Chase Liquid card offers ways for consumers to load cash for free, and withdraw cash for free, making it unlike many of the other prepaid cards.
American Express Prepaid: American Express offers a fairly cheap prepaid card. It doesn’t require a minimum balance, and there aren’t any hidden fees. It’s free to register online, offers free cash reloads at over 19,500 locations, provides free ATM withdrawals at over 24,000 locations nationwide, and offers free online bill pay.
Mango: Mango isn’t as mainstream as the other two, but it offers some cool features. You can apply online for the card, there are no overdraft fees, hidden fees, or interest charges. Mango also has a savings account that pays a 6 percent APY. The con? It charges $2 for ATM withdrawals, which can add up pretty quickly if you withdraw often.