Best Prepaid Debit Cards
The popularity of prepaid debit cards has grown in the past several years according to a study from the Federal Reserve. In fact, they say that prepaid cards are "the fastest growing noncash payment type." This may have something to do with the huge amount of credit card debt in the US today.
Perhaps consumers are moving to an option that is as quick as other cards without high interest rates, penalty fees or risks of debt. A large population who cannot qualify for traditional bank accounts also use this card as a bank account alternative.
How is a prepaid debit card different than a credit card? For that matter, how is it different from a typical debit card? To be clear, prepaid debit cards are completely different than the debit card that is connected to your bank account. They are unlike credit cards because when you use one, you are not borrowing from a line of credit. You are using money that has already been paid, hence the term prepaid. They are different from normal debit cards because the money you are using does not come from your bank account.
The money on a prepaid card is added by you and in some cases, you can have a portion of your pay check go directly onto the card via direct deposit. For you, it is sort of like a gift card that you can use anywhere and for the people behind the cash register it is like a debit card where they are guaranteed the availability of funds.
Prepaid Debit Cards: What to Consider
Before you sign up for a card you should be aware of their advantages and disadvantages. Since you are using money that you have already paid, there is no risk of accumulating interest on money you owe, which is a big advantage over credit cards. However, these cards often come with fees, which discourage some card users. Also, prepaid cards may take some time to register money that you put on them. For instance, if you load a card in the morning you may not be able to use that money on your date that same night. However, since prepaid cards are becoming more and more popular, there are several cards to choose from and some are better than others. Here are a few things to consider:
- Look for cards with low fees. Monthly maintenance fees are common but there may also be fees associated with loading the card, contacting support and viewing your balance. Ask about these fees and choose the card that won't nickel and dime you to use your own money.
- Take a look at some of the extras and specific uses for each card. There are savings cards, bill paying cards and even allowance cards for teens. There are several cards with specific uses; choose one that will allow you the flexibility you are looking for.
- Ask about the time it takes for money you put on a card to be usable. Try to find a card with the least amount of wait time.
Card.com Visa Prepaid Debit Card Review
- No overdraft fees
- No minimum balance
- No credit check
- Monthly fee can be waived with direct deposit
- Personalized cards
- $3.00 withdrawal fee
- Monthly maintenance fee without direct deposit
If you are looking for the card with the least amount of fees, Visa's Card.com is the one for you. There are no overdraft fees or minimum balances which means if you run out of money before you can load more, there are no penalties. There is also no credit check, which makes sense considering you are using your own money, not borrowing. Finally there is no fee for signing up; this truly is a no nonsense card. There is a $5.95 monthly fee for using the card. However, this fee is waived if you set up a direct deposit to the card. When your direct deposit is at least $800 the next month's maintenance fee is waived. There is, however, a $3.00 withdrawal fee if you want to take cash out of the card.
There are two things that make Card.com unique. If your friends or family also has a card, you can seamlessly transfer money from your card to theirs. The second unique quality is their card customization. You can choose from thousands of different designs and images.
Verdict - Superb
Visa's prepaid card is definitely a fine choice. Their limited fees and the fact that you can eliminate even the most standard monthly maintenance fee with a direct deposit are great benefits.
Mango Money Prepaid Debit Card Review
- No overdraft fees
- No minimum balance
- Monthly fee can be waived with $500 deposit
- No fee money transfers to other Mango subscribers
- Great savings account with high APY
- ATM withdrawal fee
- Fee for checking balance at ATMs
Master Card's Mango money prepaid card is a great card with a money saving focus. A Mango Money savings account boasts high APY, as much as 6% which is, as they say, "45% higher than the industry average." The best interest rates are reserved for those who set up direct deposit, if you don't, you can still get a 2% APY which is still pretty high. If saving money is your goal this is a great card to consider.
There are no sign up fees, no customer support fees and no overdraft fees. There is a $3.00 monthly subscription fee but it can be waived if you have $500 deposit each month. There is a $1 fee when you check your balance at ATMs but it is free to look up online or on Mango's handy mobile app. There is a $2 ATM withdrawal fee if you need cash off the card.
Verdict - Great
Mango is another great choice for prepaid debit cards, especially for saving money. It is also a great low fee option.
American Express Prepaid Debit Card Review
- No overdraft fees
- $1 monthly fee can be waived with $500 direct deposit
- Free withdrawal with MoneyPass ATMs
- Free cash loading at 7-11
- Good savings account options
- $2.95 card purchase
- $2 withdrawal fee at non-MoneyPass ATMs
After recent changes to the American Express Serve card, it has become a great option on the market. Many of its already small fees are avoidable. They have a $1.00 monthly fee that can be waived if you directly deposit $500 onto your account the month before. There is a $2.00 ATM withdrawal fee which can be avoided by using a MoneyPass ATM. They also allow no fee cash loading as long as it is in a location within the Vanilla Reload Network, which is available in places like Walgreens and 7-11.
The Serve card also has its own savings account called Reserve. Clever names aside, the Reserve feature allows you to set up automatic deposits or one time only deposits, which really helps to encourage savings. Purchasing the card costs $2.95 and has a slightly higher than average foreign transaction fee but overall it is a fine choice.
Verdict - Very Good
Serve's small fees and decent savings program definitely outweigh the cards cost. This is a card worth checking out.
Green Dot Prepaid Debit Card Review
- No credit check
- No overdraft fees
- Monthly fee can be waived with $1000 deposit
- Use mobile app to avoid other fees
- ATM withdrawal fee (at non-MoneyPass ATMs)
- In store activation fee
- In store money loading fees
Visa's Green Dot card has a good reputation as being a top prepaid debit card. It has more fees than its Card.com brother but they offer many ways around them. You can skip the $4.95 activation fee if you sign up for the card online instead of in a retail store. There is $5.95 monthly maintenance fee unless you load $1,000 on the card 30 days before billing. Adding money to your card manually at a retailer comes with a $4.95 fee but this can also be avoided by setting up direct deposits.
There are no fees at MoneyPass ATMs but there are $2.50 fees for withdrawals at non-MoneyPass ATMs and $0.50 fees for balance inquiries. There are no overdraft fees or credit checks.
Verdict - Very Good
The green dot card is a well-respected option in the industry. There are several fees but Visa offers ways around them, which is not as convenient as no fees at all but still means you can get the card with low fees.
PayPal Prepaid Debit Card Review
- Quick reloads (connected to your PayPal account)
- Free direct deposit
- Optional savings account
- Cash back rewards at certain retailers
- $4.95 monthly fee
- ATM fees
The PayPal Prepaid MasterCard is an interesting option because it is the only card that allows you to link the ease and convenience of your PayPal account with your offline purchases. This card allows you to transfer money from your PayPal account to your card in real time. This makes for quicker card loading and ease of use which is a primary concern for many prepaid card users. However, this quick and easy to use card isn't the cheapest option.
There is a $4.95 monthly subscription fee and, unlike with other cards, you cannot avoid the fee with a direct deposit of a certain amount. There are also ATM withdrawal fees but direct deposits are free.
Verdict - Good
This is not your least expensive option but the fact that it is the only card that can connect to your PayPal account and provides quick access to funds may make it worth the fees.
Prepaid debit cards are a good payment option, especially for those who don't qualify for bank accounts. Fees and monthly costs are a problem, especially considering the fact that you are paying to use your own money. However, cheap options are available so the under-banked can find a card that works for them.
Prepaid Debit Cards FAQs
How does a prepaid debit card work?
Prepaid debit cards are a popular payment method and their popularity is growing rapidly. The basic idea is that you preload a credit card with money and use it like a standard card. It isn't connected to your actual bank account. This means you don't have to worry about the implications that come with having an account balance that is too low or overdraft fees. When you run out of money you simply reload the card. They are offered by big companies like American Express and Visa so you can use them basically everywhere.
One drawback to these cards is the fees that come associated. Regular debit cards are protected by federal consumer protection laws but prepaid cards are not, so fees are possible on some prepaid cards. Typically, using it to make cash withdrawals from ATMs triggers fees up to $2 per withdrawal. There may also be a fee when loading the card as well. On the other hand, they do help control overspending.
Are prepaid cards only for personal use?
No, prepaid debit cards can be used for multiple purposes beyond just personal use. They can be used to give a monetary gift with less restriction than a gift card. Gift cards are typically for specific stores and even more universal gift cards aren't accepted everywhere. Plus, a prepaid debit card can be used at an ATM if cash is needed. With a gift card you are stuck with just one payment method.
Prepaid debit cards are also used as an alternative payroll method by some businesses that have employees with no bank accounts. The prepaid card is given to the employee and can be filled again every pay day.
What is the difference between a prepaid debit card and a regular debit card?
Although, prepaid debit cards and debit cards both share a similar name, they are two very different methods of payment. A debit card or bank card is connected to your bank account and when you make purchases, the sum is directly deducted from your account. A prepaid debit card (or money card) is not tied to a bank account-it is preloaded prior to use.
When you use up a prepaid card you simply reload it. There is no overdraft, no credit; when it runs out that's it. When you run out of money on a debit card it means your account is void of funds but you may be able to borrow money against the card from the issuing bank for a fee. The basic advantage for a prepaid card is avoiding those overdraft fees and controlling your spending. Although both cards have fees, debit card users are protected by federal consumer laws whereas prepaid cards are not. Prepaid cards are subject to ATM withdrawal fees and fees when you load the card. This means you pay to use your own money. However, the savings may be worth it for those who are worried about overspending.