What is a Reloadable Credit Card? How to Get One and When Prepaid Cards Make Sense

Most of us have received gift cards for plenty of occasions over the years — birthdays, holidays, housewarmings. If you’ve ever seen a Visa or Mastercard logo on one, it may have been a reloadable credit card. 

Reloadable credit cards, also known as prepaid cards, allow you to load funds and spend money without needing to apply for credit or open a bank account. They aren’t actually “credit” cards, really, they’re more like debit cards, but the term seems to have caught on.

A reloadable credit card is a prepaid card that you can use to spend money without needing a credit check. You can use them at merchants that accept credit cards, but they don’t help you build credit because you’re not charging anything to a credit line.

If you have a poor credit score, or are just banking-averse, you can use a reloadable credit card to make purchases at most places that accept credit cards. I’ve used plenty of reloadable credit cards over the years, so I can tell you about their benefits and drawbacks and explain how to choose the right prepaid card for you.

Reloadable credit cards operate in a similar way to traditional credit cards, but they use money you’ve already paid. Below, I’ll cover the ins and outs of reloadable credit cards so you can use their benefits to the fullest. 

No Credit Check

Reloadable credit cards are a great option for consumers with poor or no credit history because anyone can be approved for one. Reloadable cards require no credit check, so that makes them super accessible. 

Traditional credit cards usually have extensive credit approval processes attached to them. This can make them less than ideal for individuals who have poor credit scores. 

Reloadable credit cards have fewer strings attached than regular credit cards. All you have to do is load your card with a balance and reload when that balance reduces — or don’t reload at all. It all depends on your needs. 

You can also obtain reloadable credit cards quickly and easily. Head over to a bank, a discount store, or a supermarket to purchase a card. You can then set up a PIN, activate the card, and use for your everyday purchases. Simple as that!

Flexible Funding Options

Reloadable credit cards provide plenty of flexibility. Cardholders can leverage several funding and withdrawal options to make managing their cash easier.

Reload methods include direct deposit, bank transfer, or loading cash at retail locations. Having 

multiple reload methods provides you with convenience and accessibility and can be especially useful during emergencies. So no matter where you are, you can probably find a way to reload your card. 

Some reloadable cards also have mobile applications. Card manager apps allow you to easily manage your card and give you similar controls to those of traditional banking apps.

For example, you can use your card manager app to lock or unlock your card for security purposes. Other capabilities include ordering a new card, tracking spending, and establishing parental controls. 

Use Anywhere Credit Cards Are Accepted

The beauty of credit cards is that you can use them anywhere, even abroad. Thankfully, the same is true with reloadable credit cards. 

Reloadable credit cards are accepted almost everywhere that takes credit cards. Most prepaid cards are distributed by Visa and Mastercard, making them widely accepted. 

You can also use your reloadable card for various financial transactions, including bill payments and online purchases. Most cards also allow you to withdraw money from ATMs, but only up to the amount of funds you have on the card. 

There’s a lot to love about reloadable cards. They’re convenient, accessible, more secure than cash, and can be extremely helpful under special circumstances, such as making purchases while abroad. 

But nothing’s perfect, and there are drawbacks you should consider before purchasing a prepaid card. In this section, I’ll list the top benefits and drawbacks of reloadable credit cards to help you decide with all the facts. 

Benefits

• Manage spending and avoid debt: Preloading funds allows you to better manage your spending and avoid debt. Reloadable cards encourage you to track spending because you can only spend what you have on the card. Unlike traditional credit cards, the balance you’re accessing is set up by you and goes down each time you make a transaction. This makes it a great tool for budgeting. 
• Fraud and theft protection: Similar to traditional credit cards, reloadable credit cards may provide protection against fraud and theft. In most cases, you won’t be held responsible for unauthorized transactions if you report the fraudulent charges immediately. 
• Access to financial services for underbanked individuals: Many people across the world are unbanked or underbanked due to limited infrastructure or access to financial services. Prepaid cards allow underbanked individuals easy access to bank-like services without requiring them to set up a bank account. 

Drawbacks

• Fees and Charges: Reloadable cards do include fees and charges, starting with their purchase. You have to pay a small fee to buy a reloadable card. Then, there are other usage fees involved, including activation fees, overdraft charges, and reload fees. Reading the fine print can help you identify what fees your card has.  
• No Credit Building Opportunities: Although they have “credit” in their name, reloadable credit cards can’t help you build credit. You are using your own money to make purchases instead of borrowing credit from a lender. So none of your financial activity is reported to credit bureaus.
• Fewer consumer protections: Prepaid cards may not have the same level of consumer protection as traditional credit cards. Unlike regular credit cards, reloadable cards don’t offer travel insurance or extended warranty coverage. 

Reloadable credit cards aren’t just for last minute panic gifts and bank-free budgeting. They’re multipurpose products. Even if you have a bank account, reloadable cards have other use cases for you to consider. One of those is travel spending, but I’ll cover more about their use cases below. 

Travel Expenses

Do you really want to go to a currency exchange while traveling abroad? Post-COVID, even? I didn’t think so. If you don’t want to sign up for a travel credit card, prepaid cards can make excellent travel resources while shopping abroad. Their convenience and accessibility allow you to take these cards on the go wherever you go. 

Reloadable cards make managing your travel expenses easy. Not only are they accepted worldwide, but they also provide more flexibility in currency exchange. 

Some prepaid cards even allow you to bypass pesky foreign transaction and ATM fees. Those fees can add up quickly with every purchase, especially with traditional credit cards. 

Travel-specific prepaid cards enable you to preload cash in multiple currencies, fixing it to the current exchange rate, so you can use your money overseas fee-free.

If you’re on a set budget, reloadable cards can be especially helpful. Load up your card with the maximum monetary amount you want to spend on your trip, and you’ll be sticking to your conscious spending plan in no time. You can spend, knowing you won’t go over your limit. 

You also don’t have to carry cash around. Carrying cash has several downsides, including loss or theft. Reloadable cards include built-in protection. If your card is lost or stolen, you can cancel it immediately and have your balance reimbursed by the issuer. 

Teaching Financial Responsibility

Reloadable cards are also great tools for financial literacy. Hands-on experience is one of the best ways to learn and digest material, and reloadable cards can serve as a vessel to teach financial responsibility in the classroom or at home. 

Learning about financial health as early as possible can help put your teen or students on the best trajectory forward. Financial literacy covers a broad range of subject matter but mostly focuses on helping people manage their finances. 

Reloadable cards are simple but effective tools for managing allowances and teaching financial responsibility. Since they are so accessible, anyone can purchase and use one, including teens without credit histories. 

The following are habits reloadable cards can help students learn some important financial skills:

• Budgeting and Saving: Students can learn to budget with financial limitations in mind. 
• Conscious spending: Teens can be made more aware of their buying decisions and learn not to overspend since reloadable cards have a preset balance limit. 
• Avoiding debt: Prepaid cards can prepare students to handle money in the real world. Because it’s slightly restrictive, a prepaid card can teach students how to spend their money wisely without going into debt. 
• Reasonable care for cards: Financial safety includes learning how to properly use and take care of your credit and debit cards. Reloadable cards can act as a stand-in to teach students how to protect themselves and what to do when they encounter loss or theft. 

Prepaid cards also have built-in guardrails, unlike credit cards. So parents can monitor and control spending by loading funds as needed.

As an Alternative to a Bank Account

We all probably know a relative who saves cash in precarious places — under a mattress, anyone? Although owning a checking account is the traditional route to go, many people don’t have access to traditional banking services or just have a poor bank account history. 

In this case, using a reloadable credit card can serve as an excellent alternative. Unbanked or underbanked individuals have easy access to reloadable credit cards since they are available at most major stores and drugstores.

Although reload methods vary by card, reloading your cash is simple. Reloadable credit cards offer multiple ways to deposit money, including direct deposit, bank transfer, and loading cash at retail stores. 

You can also load different types of income, including wages, government benefits, and tax refunds. Some government programs and employers will even provide you with a card, saving you the trouble of finding one.  When you need to withdraw cash, you can use an ATM or select cash back at retail checkouts. 

Prepaid credit cards also offer useful features, similar to those of credit- or bank-issued cards, for managing your money. Many have dedicated apps for accessing your account virtually wherever you go. With these apps, you can check your balance, lock your card, and employ parental controls, among other things. 

Every reloadable card has its upsides and downsides. That’s why understanding their terms and conditions is crucial to choosing the right card for you. By weighing your options, you can determine what tradeoffs you’re willing to accept for the best benefits and situation. 

Compare Fees and Costs

As I mentioned before, reloadable credit cards can come with serious fees — so serious that you can pay a fee for every purchase you make. Thankfully, avoiding fees is possible.

While doing research, I discovered that some cards have fewer fees and limitations than others. Reading your card’s agreement terms can help you gauge your total cost of ownership and assess whether using it will be worth it or not. After all, no one wants to lose money to meaningless fees. 

Considering your usage patterns can also help you avoid certain fees and choose a card with the right terms for you. If you constantly need cash on hand, a prepaid card with ATM fees will probably not be ideal. 

There are some fees you should try to avoid at all costs, such as monthly service fees and customer service fees. Monthly service fees can go up to $8 a month, for example. 

Every prepaid card has its own combination of fees and charges, but some cards have better agreements than others. If you’re set on using a prepaid card, try to pick one with the tradeoffs you can live with and the fewest fees.

Evaluate Features and Benefits

People use reloadable credit cards for various reasons. Maybe you’re going on a European getaway next month and need a no-fuss way to manage your cash. Or maybe you have a poor bank account history and need a quick solution while you search for a second-chance bank account.

We all have our personal financial goals, and we should aim to align those goals with our financial products. It’s a good thing that a variety of prepaid cards exist, so you can choose a card with features that work for you. 

Some cards even provide incentives, including rewards and cash back programs, to encourage use, though they provide fewer rewards than traditional credit cards. 

For example, the Walmart MoneyCard, which is a Visa card, offers shoppers up to $75 in cash back rewards each year. You can receive rewards for purchases made at Walmart.com, Walmart fuel stations and stores, and in the Walmart app.

You can also purchase cards that enable you to manage multiple accounts. This type of feature is perfect for families with parents who want to teach teens about financial responsibility. You can order several cards, monitor financial activity, and manage all of your cards in the app. 

Understand the Terms and Conditions

Financial situations can be delicate matters. That’s why reading the terms and conditions of financial products can come in handy. It helps you understand all the facts and not just assume your rights. 

In the case of reloadable cards, considering their terms can help you get the best out of them and avoid major mix-ups. Reloadable cards have different obligations than traditional cards, so you don’t necessarily get the same benefits and consumer protections.

You should check your card’s terms and conditions to understand restrictions and requirements. This way, you can make the best purchasing decision. 

Reloadable credit cards offer a high level of convenience and accessibility, similar to traditional credit cards. Anyone from teens to underbanked individuals can use these cards to make purchases and manage their money. Not to mention, you can use them almost anywhere. 

Although prepaid cards have excellent benefits, their downsides can be glaring depending on your needs and financial situation. For example, they won’t help you build credit and carry fees that can put a damper on your experience. 

Looking for a reloadable credit card with low fees and fewer limitations can help you get the best out of your financial experience. After all, we all want to enjoy managing our money.