Pre-Paid Debit Cards: Are They a Good Deal? (2024)

FAQs

Pre-Paid Debit Cards: Are They a Good Deal? ›

Pre-paid debit cards do not help you build credit. Many pre-paid debit cards charge fees before you even start using them. There is usually a monthly fee and fees on common transactions such as ATM withdrawals, card replacement, direct deposit, and reloading the card.

Prepaid cards can be a good way to stay out of debt because you can't spend more than the amount you've already deposited. They're also a useful budgeting tool. Even if you have a checking account, you could put a fixed amount on a prepaid card each month for certain spending categories, such as dining out.

But there are some downsides to consider when using them. You can't build credit with them and the money you load onto them won't earn interest. And many prepaid cards lack standard banking services, such as a way to withdraw or reload cash for free.

With a regular debit card, there's always the danger of spending more than what's available in your checking account and overdrawing. A prepaid card allows you to load exactly the amount of money you have to spend. Once the balance reaches zero, you can't spend any more until you reload more funds.

Disadvantages of prepaid debit cards

Prepaid debit cards may have additional fees associated with ATM withdrawals, card replacement, direct deposit, inactivity, card cancellation, paper statements, and card reloading.

Some prepaid debit cards let you load up to $15,000 onto your card, while others may have a lower maximum amount. For example, the Regions Now Card has a $7,500 balance limit. You can find the maximum limit on your prepaid debit card by reading your card's terms and conditions.

Most prepaid cards charge costly fees that can include a transaction fee for every time you use the card. Other fees to look out for include annual or monthly maintenance fees, cash reload fees, inactivity fees, foreign transaction fees, balance inquiry fees and more. Won't help build credit.

What Can You Not Do With a Prepaid Card? With a prepaid card, you cannot borrow money. 3 (It does not function like a credit card.) You only have access to the funds loaded on the card, which can be reloaded, but you cannot utilize more money than you have.

You want to limit your spending: A prepaid card can help you avoid spending more than the balance available on your card. You need a checking account alternative: If you don't have a checking account but want the convenience of using a card instead of cash, you may opt for a prepaid card.

What is the best reloadable prepaid card? ›

A prepaid card is not linked to a bank or credit union account. Instead, you put money into the card account, sometimes called loading money onto the card, before you can spend it. With a debit card, you are spending money you have in your bank or credit union account.

It is normal to worry that a prepaid card is less safe than a debit card, but this is not true. Prepaid cards are as secure as debit cards as they are PIN protected and you cannot release funds from them without successfully entering a PIN.

Before purchasing a plan, know how much data you will need to avoid these inconveniences. Another drawback is that a prepaid plan often limits or prevents international calling from the U.S. to another country, and prevents international roaming if you travel abroad.

Is my Prepaid Card Protected? Your prepaid card is protected from anyone else using it for unauthorised activity – but only from the moment you report it as lost or stolen. That is why you must report your card as lost as soon as you realise it is missing. Most providers have a 24-hour emergency line, so don't delay.

Summary. Criminal worldwide are using Prepaid cards to commit money laundering and frauds. They use it in the placement, layering, and integration stages of money laundering. The criminals exploit the critical features of prepaid cards, such as anonymity, global reach, portability, and easy funding methods.

In contrast, prepaid cards don't impact your credit. Since you can only spend money you've got on the card and you aren't borrowing any money, there isn't any payment history to report to the credit bureaus and there won't be any impact to your score.

There are also some drawbacks for you to consider, like: Fees and charges - Prepaid cards can come with lots of fees which vary from card to card, so be sure to read the terms and conditions carefully before you choose.