The banking industry has evolved over the last decade, making people's lives easier. People can choose where to pay for gas, groceries, and even utility bills like electricity and telephone bills without opening a bank account. They don't even need credit cards to pay for their liabilities, as that is made possible with the help of prepaid cards.
Prepaid cards have made it very simple and convenient to carry out transactions and pay for their respective purchases. Prepaid cards work in the same way as any debit card, as it uses your funds to pay for bills. With prepaid cards, a person can set up a direct deposit, which is helpful when they have to make fixed payments like rent, etc.
If the bank fails to acknowledge them, prepaid cards are backed by FDIC insurance; up to a quarter-million dollars protect the deposits a person makes. People prefer prepaid cards over debit and credit cards merely because it is prone to less risk and can take care of money management effectively.
Parents use prepaid cards to teach their children about the importance of money and how to spend and manage it for their betterment. This is an effective way to make your children confident and be sure that they will be careful in money matters. Some parents use this strategy before making their children authorized users of their credit cards because they wish to know the significance of hard-earned money.
Some people do not have an excellent reputation for spending by remaining within the agreed budget, so that a prepaid card can help them. A prepaid card can help individuals better manage and monitor their spending by receiving updates daily on how much they have spent. The prepaid card can be the step that any person would need to move to better plastic cards like credit cards.
The article will cover the basics of prepaid cards and discuss the benefits and drawbacks of owning one. The article will highlight a person's methodology before choosing a prepaid card. We will cover in detail the best-prepaid cards. A FAQs section will be added to answer some general questions.
A prepaid card is also referred to as a prepaid debit card as it works in the same way as a debit card. A prepaid card is good for the amount deposited in the card's account from an individual's funds. Prepaid debit cards have different cards that people can use, including Visa, MasterCard, and American Express.
The logo of Visa, MasterCard, and American Express holds significance over prepaid cards as it shows which payment network is approving the funds for the transaction. The logo is also important because some businesses do not accept prepaid cards. For instance, a business that does not allow payments through American Express debit cards will not accept payment through the prepaid version of that card.
Although prepaid cards are similar to gifts cards, they do not share one crucial feature: prepaid cards can be reloaded with funds again. However, gifts cards do not share such a feature, and once the max amount is reached, the gift card cannot be used for further use. A person can transfer an amount from one account to another with prepaid cards, whereas gift cards are not an option.
Several businesses use prepaid business cards to manage their funds and allocate transactions. These cards also have fraud liability protection which means that if a particular transaction happens from the card that the business did not approve of, it will be taken care of, and the business won't need to pay for it. Prepaid business cards even offer the latest purchase notification to keep track of all the transactions.
Let us look at the benefits and drawbacks of prepaid cards.
In the previous section, we covered the fundamentals of prepaid cards. Here, we will see how beneficial prepaid cards are and the drawbacks of using these cards. Let's dive into it!
A person does not need to have a good credit score to get hold of a highly rated prepaid debit card. The reason is that there are no credit checks which mean that people with low or poor credit score can also apply for prepaid cards. No credit checks would also mean that the credit history would remain safe without any credit inquiry. Hence, people need not worry about the hard inquiry on their Credit because that is not part of the requirement for prepaid cards.
People can use prepaid cards only to a specific limit, ideal for those who require it to manage their budget. Since people can only spend the amount on the card, it provides people with a spending limit by controlling monthly spending. In this way, people can cut back some amount and save that amount for other use.
A prepaid card does not need a banking account attached to the card. Unlike credit cards or debit cards with a checking or a savings account attached, prepaid cards work differently. Prepaid cards operate alone as their entity and only need cash deposited in them rather than linked to any account. That is the reason for having no credit checks.
A prepaid card is an open-loop card, which means most vendors and businesses accept payment networks like VISA and MasterCard. So a prepaid visa card or prepaid debit card can be used to pay for all the purchases made using them, provided that funds are available to meet the transaction amount. However, some retailers are picky, so they might not accept payments from specific payment networks like American Express.
If the prepaid card has its own account number and routing number, a person can add their salary directly to the card's funds without the help of a bank account. People can also opt for direct deposit and auto debit through the prepaid card to avoid the hassle of a bank account.
The prepaid card is FDIC insurance protected, which means the agency will cover the cost if the financial institution refuses it. Moreover, people can enjoy zero liability protection from the payment networks like Visa, MasterCard, etc. If the card gets stolen or some theft happens, the person can report it to the card issuer, who will file a case, return any fraudulent amount stolen and issue a new card in return.
Since prepaid cards involve self-funds, there is no interest charged by the issuer for all the payments and transactions made through the card. With zero annual interest fee, people using prepaid cards can continue making purchases without worrying about interest payments. Unlike credit cards with annual interest, prepaid card users enjoy the perks of not paying any interest fee. Lastly, no overdraft fee protects the users from external expenses.
There are several hidden fees linked to the prepaid card. A person may not know about them until they read the terms and conditions before signing up for a prepaid card from the card issuer. There are transaction fees every time a person withdraws funds from the ATM.
An individual might have to reload funds into the card, which incurs a reload fee every time an amount is added to the card. Some prepaid card issuers also charge people for inactivity fees, which they have to pay for not using the card for a particular time.
Prepaid card issuers are not liable to report your account's activities to the major credit bureaus, thus resulting in no impact on the credit score. Prepaid cards are not the ideal choice if someone wants to improve their credit scores without having any credit checks. With prepaid cards, a person will not earn any points that will count toward improving their credit ratings.
A prepaid card user has to be aware of the funds available in the card to avoid any inconvenience. There can be a situation where a person cannot pay for purchase because they have no idea about the prepaid card's funds.
Let us look at the research methodology for selecting a prepaid card.
We studied the benefits and drawbacks of owning a prepaid card in the previous section. Here, we shall look at some factors that a person should consider before deciding on a prepaid card. These factors are part of the due diligence strategy to choose the best-prepaid cards.
Every person should look at the benefits of a particular prepaid card and weigh it against its cost and other expenses. The due diligence process involves maximizing your benefits while incurring the least expenses, so it is essential to read the policy of each card to get a greater picture of their offerings.
Let us dive into these factors, which include the following:
Prepaid debit cards come with monthly or annual fees that need to be paid to the card issuer. These fees are not of a high amount; instead, the card issuers charge minimal fees while other suppliers do not ask for any fees. Those suppliers that do not ask for a transaction fee or other fees may charge their clients some other kinds of costs that they would have to pay. It is impossible to avoid all the fees that you have to pay, but a person can minimize their expenses by having a read at the supplier's policy.
It is crucial to be aware of your affordability power, and so knowing the fees and hidden costs can help you make a much better decision on the prepaid cards to apply for.
It is essential to weigh prepaid card loading options against other possible good choice prepaid debit cards. Each prepaid card has different features, including reloading options and fees charged for each reload, so proper due diligence should be carried out.
Financial experts advise using direct ACH transfers for reloading a prepaid debit card's balance. Going with ACH transfers is that they do not ask for any fees or charges when reloading prepaid cards is being carried out. People also can load the funds manually at designated deposit centers of the prepaid card issuer, but it is not recommended. The reason is that paying via cash or check will incur some unavoidable charges.
Before applying for any prepaid card, it is better to read reviews about it from people or customers who have availed of that card or services from the same issuer. It would help you know more about the kind of issuer and the good and bad things about their products or services.
After a careful review, the next step should be to check out the prepaid card issuer and see if the reviews were correct. For instance, check out the supplier's website and see if it is convenient for you to use. Similarly, install the mobile banking app of the supplier you wish to choose and see if it is user-friendly. Mobile apps are a modern way to keep track of your funds, manage it effectively and efficiently, and resolve real-time issues with effective customer service.
Some prepaid card issuers offer incentives, rewards, and other perks on how you carry out your spending and where you do it more often. Some suppliers even offer gift cards like vouchers; if not, they offer cashback rewards on gas, grocery, etc., at certain retailers like Walmart. If a person refers the card to family and friends, the user will get greater cashback schemes. Although the rewards are less generous than credit cards or other debit cards, they still have some incentives.
Let us look into the top prepaid cards in the industry.
In the previous section, we looked at the factors that influence the selection of prepaid debits cards. Here, we will discuss the best prepaid cards offered in the banking and financial industry. They include the following:
The Bluebird debit card by American Express is best considered for no monthly deposits, which makes it an ideal choice for people seeking a card with no fees. The card offers more than one way of adding money to the prepaid card to increase its funds and make purchases easily.
Users of bluebird can make a direct deposit or mobile check deposit with the help of a mobile app and can also choose to transfer the amount from a linked debit card. People who wish to go for cash reload options can do so at Walmart, which offers such a service.
American Express has more than 30,000 ATMs around the country that can be used to withdraw funds using the Bluebird card without any fee deduction. However, the company will charge $2.50 per transaction if carried out at another company's ATMs. People can also make online bill payments that will not incur any costs.
The company also offers other perks and benefits that include protection from fraud, purchase protection, and check writing. The company also has a modern banking app that brings a user-friendly experience, thus making the app convenient and straightforward.
Other incentives the company offers include no charge on account activation, and the app is suitable for family use. However, the card does not offer any cashback for any retailer, making it unsuitable for rewards.
PayPal Prepaid MasterCard is considered ideal for PayPal users as it is widely accepted at any place where MasterCard can be used for transactions. The card offers rewards such as cashback at retailers when a purchase is made using the card.
The card is suitable for those who use PayPal often to transfer or make payments, which makes using the card helpful. However, the new users who don't use the PayPal platform will not find the card helpful in terms of benefits. Customers can make an instant transfer from their PayPal account to their prepaid card. Moreover, the online banking platform is straightforward, and people can manage their accounts effectively. PayPal mobile app is user-friendly as well. The card is also linked to the direct deposit feature.
The card has some unique features and relative costs that are unavoidable, including a $4.95 monthly fee, a $2.50 ATM fee at every transaction, and a foreign transaction fee of 2.5% of the total amount. The card can not be used to make online bill payments like utility bills.
The company brings tight security features linked to the prepaid card, making it more secure. The card is a cash rewards card that offers cashback on retailers' purchases and bonuses for referrals to friends and family members. However, the company has a cap on the amount that can be transferred in a day set at $300. Moreover, any withdrawals from ATMs will incur a fee since the company does not have any ATMs.
Netspend Visa Prepaid card offers a 5% APY savings account on those balances south of $1000 and a 0.50% APY savings account on those balances north of $1000. Users of Netspend can easily withdraw cash and add funds to the card with the help of designated retailers that are linked to the company.
The card comes with a direct deposit feature where the cardholders can get their salary deposited into the card efficiently. The card is proven to be very costly for having a balance of less than $500, at which points different fees and costs are deducted. However, having more than $500 on the card will enable users to pay fewer fees.
The card has numerous rewards like referring the card to a friend or family will get you to earn some amount. However, several fees are linked to the card, including a monthly fee starting from $5, an ATM fee of $2.95 at every transaction, and a foreign transaction fee of 4% of the overall amount transacted. The card does offer to pay bills online, but there are fees linked to it which may vary for each bill payment.
Some perks linked to the card would include the mobile banking app that is easy to use and decent reloading options to add funds to the card at reasonable rates. The card does not charge for any late fees or interest, and there are no overdraft fees on purchases made using the card.
However, the company will charge a steep inactivity fee if the card is not used for a specific time.
Brink's Money Prepaid Mastercard offers a reduced monthly payment plan of $5 per month if a person deposits or keeps funds of $500 or more on the card. If the amount diminishes in any month, the person would be charged with the standard payment plan of $9.99 per month for that specific month.
The card does come with optional benefits that may include a 5% APY savings account if a person is interested in the company’s benefits scheme. Other perks may include getting a $20 deposit in the account if the person refers the card to a family member or friends. The card offers a direct deposit feature that adds the amount to the card much faster than a paper cheque. The card does not charge for any late fees or interest on the amount added to the card.
Other perks related to the card would include introducing a reduced-fee plan that helps a person save funds. The Brink’s mobile app is easy to use as it sends notifications and messages of schemes, and people can manage their accounts more effectively. The FDIC insured the card, which protects a person's funds on the card from any fraud.
However, the company does charge a high maintenance fee for sending alerts about the account. Also, the company charges customers a 2.50% ATM fee on every transaction. Moreover, monthly fees start from $5 and a foreign transaction fee of 4$ of the overall transaction amount. Online bills can be paid, but there will be a fee that will vary on the amount and the type of bill being paid.
Walmart MoneyCard is considered ideal for Walmart shoppers that prefer to buy goods and services from Walmart stores. The card offers cashback schemes to its customers who shop at Walmart. For instance, users can get 3% cashback on the Walmart app or website purchases. People can also get 2% cashback on the gas and fuel at Walmart fuel stations and 1% cashback at the Walmart in-person stores.
The card also comes with a 2% APY savings account for any amount south of $1000. People can also choose to get free reloads on their cards using the Walmart card app at the stores.
The card is prone to some fees that include a monthly fee of $5.94, but it can be written off if the card has funds of $1000 or more in it. The card also charges an ATM fee of $2.50 every time a transaction is happened using the ATM or when a cash withdrawal has taken place. There are no foreign transaction fees and the card can be used to pay bills online.
American Express Serve Card is widely used in the USA by people because of the extensive features that the card has to offer. The card has over 30,000 ATMs across the USA that people can use to make transactions free of cost. Moreover, bills can be paid online using the company’s app. The card is prone to fraud protection for the user and will cover all damages if it is stolen. There is around-the-clock customer service to help the users with any queries.
Since the card is a prepaid debit card, no credit checks or interest rate is charged on any transaction. People do not need to put down a minimum deposit to secure the card, as that requirement is waived off. The card has a direct deposit feature that efficiently transfers salary to the card.
The card has a monthly fee of $6.95, which can be written off if it has more than $500. The card charges no ATM fee for the transaction that happened using the company’s ATMs but charges $2.50 per transaction for using someone else's ATM. There is a foreign transaction fee of 2.7% of the overall amount. Bills can be paid online, but no fees will be incurred for this activity.
FamZoo Prepaid Debit Card is considered ideal for families due to the features it has to offer. For instance, the card offers free reloading of funds into the card without any charge or fee. A free trial lasts for a month to attract prospective family members. The card is also FDIC insured, which means that the agency covers your funds if the card is lost or stolen.
The card lets parents teach their children about financial education, and as a result, it offers features like moving money instantly between families without any hesitation. There is no APY linked to the card, but it has other features that include low fees.
The card is prone to monthly fees from $2.50 per month but offers no charge on ATM transactions. This means people can withdraw funds without any deductions. Moreover, the card has zero foreign transaction fees, and the online bill payment option is not applicable.
Starbucks Rewards Visa Prepaid Card has numerous features that make it intriguing for the customers who use it daily. The card comes with a maximum balance fee of $10,000, and people can earn rewards in terms of stars. For instance, 1 star is equivalent to spending 10 cents.
The card has some compulsory fees that cannot be waived off, for example, the foreign transaction fee of 3% on the overall transaction amount. However, the card does not have an opening or monthly fee.
The card does give the users the freedom to link to their Starbucks rewards programs to avail of it in the future. People cannot make withdrawals from the ATM by using this card.
Prepaid debit cards come with low limits, and so they have a limit ranging from a minimum of $500 to a maximum of $10,000 daily, with some cards having a cap of $20,000.
Some prepaid cards home FDIC insurance while others are protected from fraudulent activity. So it is essential to know about the card before getting it because not all cards are insured.
Prepaid cards are designed to be separate from other debit and credit cards as they are linked to bank accounts. Prepaid cards operate alone and have their card number and reloading number, making them safe from credit checks and fees.
Prepaid cards work out of the radius of the major credit bureaus, so the credit score remains unaffected. Prepaid card issuers do not report to the credit bureaus; hence there is no positive or negative influence on the credit score. Prepaid cards have minimal requirements, and a credit score check is not one of them.
Prepaid cards are an ideal way to start learning about the financial industry as it acts as a tool for children to learn about it. It also helps them understand the importance of funds, savings and how to utilize them in the future. People need to go through the steps discussed in this article before deciding on a prepaid card. There can be several hidden charges that a person is unaware of but written in the card issuer’s policy.
Prepaid can help people learn how the cards work and are the first ladder to move toward debit and credit cards. No person can build their financial history overnight, so the prepaid card can help them manage their funds through apps, alerts, messages, and real-time notifications. Since an individual utilizes his own money to avail of this card, there are minimal fees and zero interest on the cards.