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Prepaid Cards with Overdraft Protection in 2021

Prepaid Cards With Overdraft Protection

credit card advice

Ashley Dull
By: Ashley Dull
Posted: December 2, 2020
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Prepaid cards with overdraft protection didn’t exist just a few years ago. Banks originally designed these cards to act as a traditional checking account, which meant you could only spend what you deposited into the account.

But new laws in 2016 allowed card issuers to provide an overdraft protection service that permitted cardholders to temporarily spend below a $0 balance.

However, overdraft protection is still relatively uncommon on most prepaid card accounts. While banks such as American Express and Green Dot have a strict no-overdraft policy, other prepaid issuers have added various terms and conditions to their accounts, including something called Purchase Cushion that works similarly to overdraft services and comes at no additional cost to qualified cardholders.

Best Prepaid Cards | FAQs

Best Prepaid Cards with Purchase Cushion Protection

Sometimes our accounts get low and we make a purchase without realizing we’re a few dollars short. The embarrassment of a declined transaction at the register only adds insult to injury.

But thanks to purchase cushion programs on the prepaid cards below, you don’t have to worry about walking out of the store with your head down. Instead, purchase cushion will allow you to overspend by $10, and you’ll have 24 hours to bring your account back to positive without incurring an overdraft fee.

PayPal Prepaid Mastercard® Review

at Netspend'ssecure website

  • Move money from your PayPal account to fund your prepaid card account.
  • Earn cash back and personalized offers, just for using your card.
  • With Direct Deposit, you can get paid faster than a paper check.
  • Card issued by The Bancorp Bank, Member FDIC. Card may be used everywhere Debit Mastercard is accepted.
  • Click PayPal Prepaid Mastercard® for additional features & program details, and to request a Card.
Intro (Purchases)
Intro (Transfers)
Regular APR
Annual Fee
Credit Needed
N/A
N/A
N/A
Variable Monthly Fee
Not applicable

The PayPal Prepaid Mastercard® offers a purchase cushion program that allows for overdraft transactions of up to $10 at the bank’s discretion. To qualify, you must receive direct deposits totaling at least $200 to your account within 35 days of your enrollment in the service. You must continue to receive at least $100 in direct deposit to your account every 30 days thereafter to remain enrolled in the purchase cushion program.

You must bring your account’s available balance to at least zero within 24 hours of the first transaction that caused you to overdraw your account to avoid being charged the overdraft fee. The bank limits each account to five waived overdraft fees each month.

NetSpend® Visa® Prepaid Card Review

at Netspend'ssecure website

PREPAID RATING

★★★★★
4.8

OVERALL RATING

3.5/5.0
  • With Netspend Direct Deposit, you can get paid faster than a paper check.
  • No late fees or interest charges because this is not a credit card.
  • No Overdraft Fees on purchases using your card.
  • Use the NetSpend Mobile App to manage your account on the go and get text message or email alerts (Message & data rates may apply).
  • Card issued by MetaBank®, Member FDIC. Card may be used everywhere Visa Debit cards are accepted. Click "Get My Card" for full details.
  • See additional NetSpend® Prepaid Visa® details.
Intro (Purchases)
Intro (Transfers)
Regular APR
Annual Fee
Credit Needed
N/A
N/A
N/A
Variable Monthly Fee
Not applicable

All Netspend accounts qualify for a no-charge purchase cushion of up to $10, as long as they receive direct deposits to their account that equal $200 or more every 30 days. This cushion approves transactions of up to $10 past your current available balance.

Any transaction that takes your account more than $10 over your available balance will incur a $15 overdraft fee. There is a maximum of three such fees allowed each month. This card works similarly to the Visa debit card offerings at traditional banks and credit unions.

NetSpend® Visa® Prepaid Card Review

at Netspend'ssecure website

PREPAID RATING

★★★★★
4.7

OVERALL RATING

3.6/5.0
  • With Netspend Direct Deposit, you can get paid faster than a paper check.
  • No late fees or interest charges because this is not a credit card.
  • No Overdraft Fees on purchases using your card.
  • Use the NetSpend Mobile App to manage your account on the go and get text message or email alerts (Message & data rates may apply).
  • Card issued by MetaBank®, Member FDIC. Card may be used everywhere Visa Debit cards are accepted. Click "Get My Card " for full details.
  • See additional NetSpend® Prepaid Visa® details.
Intro (Purchases)
Intro (Transfers)
Regular APR
Annual Fee
Credit Needed
N/A
N/A
N/A
Up-to $9.95 monthly
Not applicable

As with its sister card above, the NetSpend® Visa® Prepaid Card includes the same purchase cushion at no extra charge to cardholders. To qualify, you must receive $200 or more in direct deposits to your account each month.

This card also charges a variable monthly maintenance fee based on your average account balance and the amount of money you deposit each month.

Brinks Prepaid Mastercard Review

at Netspend'ssecure website

PREPAID RATING

★★★★★
4.8

OVERALL RATING

3.7/5.0
  • Brink’s gives you the peace of mind you deserve. Securing cash and valuables since 1859.
  • With Brink’s Direct Deposit, you can get paid faster* than a paper check.
  • No late fees or interest charges because this is not a credit card.
  • Use the Brink’s Money Prepaid Mobile App to manage your account on the go and get text message or email alerts (Message & data rates may apply.)
  • *Card issued by Republic Bank & Trust Company, Member FDIC. Card may be used everywhere Mastercard Debit cards are accepted. “Apply Now” for full details.
  • See additional Brink’s Prepaid Mastercard® Details.
Intro (Purchases)
Intro (Transfers)
Regular APR
Annual Fee
Credit Needed
N/A
N/A
N/A
Variable Monthly Fees
Not applicable

The Brinks Prepaid Mastercard offers a purchase cushion that is similar to the accounts above. The purchase cushion is a free service that covers any transaction that brings your account to no more than $10 past your available balance.

The service is available to cardholders who receive qualifying direct deposits of paychecks and/or government benefits payments totaling at least $500.00 each calendar month.

ACE Elite™ Visa® Prepaid Debit Card Review

at the issuer'ssecure website

PREPAID RATING

★★★★
4.4

OVERALL RATING

3.2/5.0
  • Manage and control your money on one convenient reloadable prepaid card
  • Get paid up to 2 days faster with direct deposit
  • No-fee cash withdraws of up to $100  per day at participating ACE locations when you have regular direct deposit activity
  • Payback RewardsSM pays you back for many of your everyday purchases - the more you use your card, the more offers at select retailers and restaurants you are eligible to redeem
  • Choose from 3 card designs
  • As a cardholder, you can open an Optional Tiered Rate Savings Account. Balances up to $1,000.00 currently earn up to 5.00% annual percentage yield. No minimum balance required.
Intro (Purchases)
Intro (Transfers)
Regular APR
Annual Fee
Credit Needed
N/A
N/A
N/A
N/A
Not applicable

The ACE Elite™ Visa® Prepaid Debit Card provides a $10 purchase cushion beyond your available balance — if you bring your account balance back to zero or positive within 24 hours. Otherwise, ACE will charge your account a $20 overdraft free.

You can avoid this fee by enrolling in the card’s optional overdraft protection service. To qualify, you must receive direct deposits of at least $400 within 35 days to initiate the service. Once enrolled, you must receive direct deposits of at least $200 every 30 days to continue with the service.

What is a Prepaid Card?

A prepaid card is a financial product that is very similar to a debit card a bank or credit union would issue you.

With a prepaid card, you deposit money into a secure account that links to your card. Every time you use your card to make a purchase, the amount spent is deducted from your cash account. In most cases, your card spending cannot exceed the amount of money you have deposited into your account.

Depending on which prepaid card you have, you can deposit money into your account in several ways.

Graphic of How Prepaid Debit Cards Work

Some cards, such as the ACE Elite™ Visa® Prepaid Debit Card, work through ACE Cash Express — a payday loan center that has more than 950 locations throughout the U.S. Cardholders can deposit money by visiting a location with cash or a check.

All prepaid card accounts allow you to deposit money electronically through a linked checking or savings account. You can also have your payroll checks or government benefits checks directly deposited into your account. Some card issuers may charge a reload fee if you deposit money in person instead of through a direct deposit.

Because these cards provide flexibility in how you add money to your account — and they take away the hassle of carrying cash — many consumers choose to use their prepaid card account as a bank account.

In 2018 alone, the use of prepaid cards accounted for 10.5% of all card payments in the U.S. That year, more than $350 billion was spent using prepaid cards.

Prepaid cards are also a key component in many consumers’ monthly budgets. Whereas a credit card can pose a temptation to spend more money than you have, a prepaid card typically only allows you to spend up to the amount of money that is deposited into your account.

That started to change when new laws in 2016 allowed banks that issue prepaid cards to charge overdraft fees to consumers who spend more than what they have deposited into their account.

Many consumers did not like this change because they chose to use prepaid cards to avoid overspending. As such, the government enacted heavy restrictions as to how overdraft protection is run by prepaid card issuers.

For example — most cards provide a $10 purchase cushion that allows you to charge up to $10 more than what you have in your account. This program is typically free of charge if you receive a qualifying amount of money each month in direct deposits. You must also bring your account balance back to a positive number within a set time frame.

If you take your account to more than $10 overdrawn, you will face an overdraft fee that typically ranges between $15 and $20. The laws governing overdraft protection on prepaid cards dictate that banks can only impose this fee between three and five times per month.

Overdraft protection is typically an optional service. You can still maintain an account that does not allow for overdrafts by opting out of any overdraft services.

Keep in mind that prepaid cards do not link to any sort of credit account. That means that your account history will not report to any credit reporting bureau, and it will not help to build — or rebuild — your credit history.

Can You Overdraft a Prepaid Card?

Before 2016, the answer was no. New legislation that year made it possible to overdraft your prepaid card account, albeit with restrictions.

The prepaid card options listed above provide purchase cushion services to qualifying cardholders who opt into the program. These services typically require you to have monthly direct deposits into your accounts in varying amounts.

For example, Netspend requires cardholders to have at least $200 in direct deposits each month into their account. The Western Union prepaid card — despite being issued by Netspend — requires $500 in monthly direct deposits.

These purchase cushion programs allow you to overdraw your account by up to $10 without incurring a fee — as long as you bring your account balance back to $0 or greater within a set time frame. The amount of time you are given to do so will vary by which card you have.

The PayPal Prepaid Mastercard®, for instance, only gives cardholders 24 hours to pay off the overdrawn funds.

You will incur an overdraft fee if your bank covers a payment or withdrawal that exceeds the amount of funds available in your account by more than $10 or do not bring your account to a positive balance within the set time frame. This fee varies by card type but typically ranges between $15 and $20.

Federal laws dictate that any financial institution that issues prepaid cards can only charge this fee a certain number of times each month. Most issuers cap their charge of an overdraft fee to either three or five times each month.

Still, that fee can add up if you are prone to overdrafting your account. A $20 overdraft fee charged five times in a month would cost you $100.

Overdraft protection is a completely optional service that can be turned on or off at any time and on any card. By turning it off, a cardholder can only spend up to the amount of money he or she has deposited into a prepaid account. Any transaction that goes over that amount will be declined for insufficient funds.

How Much Overdraft Protection Does a Prepaid Card Have?

The amount of overdraft protection a prepaid card has will depend on the card issuer and its rules. Some issuers — including American Express and Green Dot — do not offer any sort of overdraft protection and will not allow cardholders to spend more than what is deposited into their accounts.

But many other prepaid card issuers will allow overdrafts of up to a certain amount. The cards on the list above will approve a debit card transaction (or any PIN-based transaction) that exceeds your available balance by no more than $10.

Key features and requirements of Netspend’s Overdraft Protection Service include:

  • Free $10 overdraft buffer
  • A 24-hour grace period to avoid an overdraft fee from the first transaction creating a negative balance exceeding $10.00
  • An overdraft fee of $15.00 (up to a maximum of three fees per month) will be charged if the account is not replenished within the grace period
  • A minimum direct deposit requirement of at least one deposit of $200.00 or more every 30 days

This overdraft coverage does not allow any ATM withdrawal that overdrafts your account. An ATM transaction has no overdraft line of credit and will only allow you to withdraw up to the current cash balance in your account.

The overdraft protection plan provided by prepaid card issuers is usually tied to the cardholder’s recurring direct deposit amounts. As with Netspend’s policy, you can often qualify for a $10 purchase cushion if you receive direct deposits into your account that equal a minimum amount set forth by the card issuer. These minimums typically range from between $200 to $500 in direct deposits every 30 days.

A direct deposit is any recurring income that is placed directly into your account at a set time. This can be your employee paychecks, government benefits checks, Social Security funds, or other payments you receive.

Some prepaid card issuers may also provide a further overdraft privilege limit that extends beyond its standard overdraft practices. These programs could allow for more time to bring your account balance into positive territory and may allow for purchases that extend your account past the $10 overdrawn limit.

In just about every case, these programs will require a hefty monthly fee that makes them an expensive option for avoiding an insufficient funds transaction. You may be better off using that money to keep your account balance in the black each month.

How Much Does Overdraft Protection Cost?

There is a difference between a purchase cushion and overdraft protection. Purchase cushion typically comes at no extra charge to the cardholder and allows him or her to overdraft an account by up to $10 without incurring a fee.

If you fail to repay the overdraft amount within a specified time frame — typically between 24 and 48 hours — you could be subjected to an overdraft fee that ranges between $15 and $20.

To qualify for a purchase cushion, your card issuer will require that you receive regular and recurring direct deposits in your account each month. The amount of directly deposited funds that you will need to receive each month will depend on the card issuer.

If you fall below that threshold, the card issuer will remove its purchase cushion your account from. You can also opt out of the program at any time.

Overdraft protection is a separate service that typically requires a monthly fee. You often find overdraft protection added to checking and savings accounts at large financial institutions. These services extend a small overdraft line of credit to the account holder and will allow him or her to overdraft on an account without having their transaction declined.

Since prepaid cards have no line of credit attached to them, they typically will not include overdraft protection without a fee. Your card issuer may partner with a bank to provide the small credit line needed to cushion your overdraft purchases.

Netspend, for example, partners with online banking leader MetaBank for its overdraft protection program. The fees for this program vary based on the amount of directly deposited funds you receive every month. Your coverage amount will also vary, with some customers receiving up to $100 as an overdraft limit.

While most prepaid card issuers do not publicly publish the cost of their overdraft protection programs, nearly all have a similar disclaimer in their credit card disclosure document that says:

“This is an expensive service and should not be relied upon to meet your financial needs.”

What is a Prepaid Card’s Spending Limit?

Just as its name suggests, a prepaid card lets you prepay for purchases by depositing money into a card account that will cover the cost of your future transactions.

As such, your prepaid card’s spending limit equals the amount of money you have deposited into your account. Most cards will not allow you to spend beyond your current account balance. Others may provide a $10 cushion beyond your balance — but you will be charged an overdraft fee of between $15 and $20 if you do not bring your balance back to at least $0 within a set amount of time.

Prepaid cards do not have a line of credit attached to them (more on that in the next question), which means you do not have a spending limit as you would with a traditional credit card.

Think of a prepaid card as a form of debit card. A debit card ties to a savings account or checking account and only allows you to spend the amount of money you have in the account.

Once you have spent the money you deposited, the card will no longer allow further purchases until you add more money to the account. Many people prefer this type of card because it helps them stay on a strict budget and does not provide the temptation to overspend.

Some prepaid cards can provide a small line of credit in the form of overdraft protection. With this service, you can occasionally spend slightly more than the amount in your account and a partner bank will cover your transaction.

While this service may seem convenient, it is often quite expensive and may not be worth the monthly expense for occasional access to credit. And when you do need access to the credit, you have a very short window — often less than one week — to repay the debt before you start incurring more fees.

What is the Difference Between a Credit Card and a Prepaid Card?

There are several differences between credit cards and prepaid cards. The key defining factor is that prepaid cards only allow you to spend money you already have. Credit cards allow you to borrow money to make a purchase.

Credit cards are a revolving line of credit. This means that the bank has approved you for a specific amount of credit that you can use and reuse after you pay the balance.

Chart Comparing Payment Card Types

When you swipe, insert, or tap your credit card to make a purchase, the credit card network listed on your card (typically Visa, Mastercard, Discover, or American Express) contacts the card’s issuing bank to make sure you have enough credit available to cover the purchase. If the bank approves your transaction, it sends the money to the merchant. You will then pay the bank back — with interest — through a series of monthly payments.

A prepaid card will still work on a credit card network (Visa, Mastercard, or American Express), but it does not use a line of credit. Instead, you deposit money into a secured savings account and then draw from those funds whenever you make a purchase. Once the money is spent, the card will not allow you to make any more purchases until you add more funds.

The term “prepaid credit card” is essentially a secured credit card, to which you make a deposit that matches your credit limit. This is a form of credit for people with low credit scores who need to rebuild their credit history.

When you use your prepaid card or any other credit card to make a transaction, the processing network will contact the bank that issues your card to make sure you have enough deposited funds to cover the purchase. If you do, the bank will send that money to the merchant and remove it immediately from your account.

The key to a prepaid card is that you will not have to pay interest charges on your purchases since you are not borrowing any money. That said, most prepaid cards do charge a monthly maintenance fee and may charge other fees for depositing or withdrawing funds.

A credit card will charge an interest rate fee for any debt you carry from month to month. Some may also charge an annual fee to keep your account active. And since a credit card is a form of a loan, you will likely have to undergo a credit check for account approval.

With a prepaid account, you will not have to worry about a credit check or your credit score. You simply have to provide enough money to open your account and pay an activation fee for your card.

Do I Need a Checking Account to Be Approved?

You do not need a checking account or online banking account to be approved for a prepaid card. In fact, many people who are unbanked use their prepaid card account as a bank account.

Having a bank account could make certain prepaid card transactions easier. This is especially true if you need to transfer money over to your prepaid account. With a linked checking account, you can move money between accounts in a matter of minutes and have the funds ready to use by the next day.

But there are many other ways to add money to your prepaid card account without having a bank account. Several prepaid card issuers have partnerships with national chain stores that allow you — for a fee — to bring cash to the store and have it added instantly to your account.

The ACE Elite™ Visa® Prepaid Debit Card is issued by payday lender ACE Cash Express. You can visit any of its 950 locations throughout the U.S. and reload your card in a matter of minutes.

Netspend partners with more than 130,000 U.S. locations to offer instant card reloading with cash. These include ACE Cash Express locations as well as several national chain gas stations and convenience stores.

And just like a checking account, you can also have funds directly deposited into your card account. This can include your paycheck from regular employment, your monthly government benefits checks, Social Security checks, structured settlement funds, or any other recurring payments.

Prepaid card issuers especially like it when you have a recurring direct deposit made to your account because it gives the bank a regular balance that it can depend on. Cardholders who receive direct deposits often qualify for reduced fees or special programs, such as a purchase cushion or overdraft protection.

Your enrollment in these programs does not require you to have a checking account or savings account, aside from your prepaid card account.

Will Netspend Cards Let You Overdraw Your Account?

Netspend cards — like all prepaid cards — are not designed to allow cardholders to spend beyond the amount of their current account balance. But Netspend does provide a purchase cushion service to qualified cardholders.

Netspend card members can opt-in to the purchase cushion as long as they receive direct deposits to their account that equal $200 or more every 30 days. This cushion approves transactions of up to $10 over an account’s current available balance.

Any transaction that takes your account more than $10 over your available balance will incur a $15 overdraft fee. There is a maximum of three such fees allowed each month.

Netspend Overdraft Protection Fees

Netspend will cover up to $10 past your balance three times per month. Each overdraft will incur a $15.00 fee if the account is not replenished within 24 hours.

Netspend card members who opt in for a purchase cushion overdraft service will also incur that overdraft fee if they do not bring their account balance back to at least $0 of sufficient funds within seven days after the transaction that overdrew the account.

If at any point you do not receive at least $200 in direct deposit funds within a 30-day period, Netspend will automatically remove you from the purchase cushion program. If you do not completely opt out of the program at that point, you will incur an overdraft fee for any debit card purchase that brings your account below $0.

If you opt out of the purchase cushion service, Netspend will cap your spending to the amount of your account balance. Any debit card purchase that attempts to overdraw the account will be declined due to insufficient funds.

How Much Can You Overdraft On a PayPal Card?

The PayPal Prepaid Mastercard® provides a $10 purchase cushion protection service to cardholders who opt in to the program.

This purchase cushion program is only available to cardholders who receive direct deposits totaling at least $200 to their account within 35 days of their enrollment in the service. Direct deposits of at least $100 must be made to the account every 30 days thereafter to remain enrolled.

Paypal will cancel enrollment if the cardholder at any point falls below the $100 in required direct deposits during a 30-day period.

Even if you are enrolled, you will still incur the $25 overdraft fee if you fail to bring your account’s available balance to at least zero within 24 hours of the first transaction that caused you to overdraw your account. The bank limits each account to five waived overdraft fees each month.

You can add money to your account by transferring money instantly from a PayPal account, adding money through a direct deposit, or depositing cash at more than 130,000 different Netspend reloading center locations throughout the U.S.

Prepaid Cards with Overdraft Protection Can Help You Avoid Declined Transactions

Life happens. Bills and unexpected expenses have a way of going hand in hand. Sometimes, in an effort to take care of all your obligations, you lose track of how much money you have left in your account.

An overdraft protection plan can help you overcome those moments so you do not end up in the checkout lane with a declined card and bruised ego. Prepaid cards with overdraft protection allow you to complete transactions that overdraw your account by as much as $10 with no penalty or fee — as long as you restore sufficient funds in your account soon after the overdraft.

A single overdraft fee can take between $15 and $25 from your account. If you tend to overdraft several times each month, this service can save you money over the long run. And if you receive regular direct deposits into your account, you could avoid other fees and charges and make your prepaid card account more affordable and beneficial to your financial future.

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