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Review Breakdown: Prepaid & Debit Cards
Prepaid debit credit cards, especially those with no monthly fees and direct deposit, represent a popular way for consumers to enjoy the convenience of a credit card without the debt and interest payments. Below is a summary of the best reloadable debit cards on the market. Simply click the card name to visit its official application.
Even the best prepaid credit cards have a limited function — to act as a cash substitute wherever credit or debit cards are accepted. Despite their name, prepaid credit cards are not credit products and do not offer a cardholder the option to finance purchases over time.
Nevertheless, prepaid cards provide convenience for consumers who can’t or prefer not to use credit cards. If you are prepaid-curious, read on to have your questions about prepaid credit cards answered.
1. What is a Prepaid Credit Card?
A prepaid credit card, which is really more akin to a debit card, is a piece of plastic that externally resembles a credit or debit card in every way. But behind the scenes, prepaid cards tap the cash you deposit into the card account rather than your credit line or checking account.
Prepaid cards carry the logo of the same Visa card, Mastercard, and American Express networks that process credit and debit card transactions and are accepted at the same places. You can obtain prepaid cards whatever your credit history (or lack thereof), which means they are a way for consumers with low or no credit scores to shop with plastic at retail and online venues.
2. How Does a Prepaid Credit Card Work?
Prepaid cards are simpler than credit and debit cards in most respects. That makes them relatively easy to use.
The card is attached to an account you open when you first buy the card. You can do a cash reload to your account at any time, although there may be limits on the minimum and maximum deposits.
To use the card at a retail location, you present it as you would a regular credit or debit card. This usually means inserting the card into a terminal to read the card’s chip or swiping it to scan the magnetic stripe. The terminal will ask you, somewhat misleadingly, to choose either a debit or credit transaction.
You enter your PIN for a debit transaction (this is called a PIN transaction) or sign your name for a so-called credit transaction. A PIN transaction is usually costlier than a signature transaction. Either way, the purchase amount is subtracted from your card balance.
If your balance is insufficient, your card will be rejected. Otherwise, press the approval button on the terminal to complete the transaction.
For example, suppose your reloadable prepaid card balance is $100. If you use your card to make a $25 purchase, your new card balance will be $75. However, if you try to make a $200 purchase, your transaction will be rejected.
Some cards offer an optional overdraft protection feature that allows you to tap another account or small credit line to prevent an overdraft, but fees usually apply.
Online shopping with a prepaid card requires you to enter your card number, just as you would for a debit or credit card transaction. The card should have a security code to make it compatible with regular credit cards.
3. How Do I Get a Prepaid Card?
First, consult our prepaid card reviews above to select the right card for you. Once you make your selection, visit the issuer’s website to check your purchase options, either at retail locations (like pharmacies and grocery stores), over the phone, online, and from some banks and credit unions.
When you buy the card, you’ll be required to load an initial amount, which may be subject to minimums. You may have to pay a new card fee and/or an initial activation fee for the card. Some issuers waive these fees under certain circumstances, such as purchasing the card online.
If you do buy the card online, you may be immediately issued a virtual card that you can use for card not present transactions (e.g., purchases made online, through a smartphone app, or over the phone) until you receive your physical card. Some cards require you to register your new card by providing personal information such as:
Date of birth
Social Security number
Registration is an important step, because certain features such as online use or reloading money may be restricted until registration is complete. Also, if you don’t register cards that require it, you won’t be protected against the card’s loss or theft. You also may need to register to become eligible for deposit insurance on cards that offer it.
4. Are Prepaid Cards Free?
The issuers of prepaid cards don’t make a dime on interest because a cardholder can’t charge purchases on credit. Therefore, issuers must find other ways to make money on these cards, which they do by charging fees.
The first fee you’ll encounter is for activating the physical card. Issuers can charge a flat monthly fee or collect pay-as-you-go fees on every transaction. In fact, many issuers give you the choice of fee payment methods.
For consumers who choose to pay monthly, some cards will reduce fees when your deposits exceed a specified threshold. Prepaid cards cannot charge a late fee or overdraft fee because they do not extend credit nor let you spend beyond your cash balance.
Other fees may also apply, such as an inactivity fee. Some cards waive a reload fee if you load your card through a direct deposit of paychecks or government benefits. Typically, fees are subtracted directly from your account balance.
A few prepaid cards pay you interest on your cash balance, much like a savings account. You won’t get rich on these interest payments, but they’re better than nothing.
The closest approximation to a totally free reloadable prepaid card is the Bluebird by American Express® prepaid card. It charges fees to get a new card at a retail location, to add funds at certain locations, to use out-of-network ATMs, like a Chase ATM, and to pick up cash via Ria. Everything else is free, including the online card price, a monthly and annual fee, activation fee, and most fees for withdrawing funds, spending money, sending money, and obtaining account information.
Some prepaid cards offer cashback rewards. For example, the American Express Serve® Cash Back prepaid card pays unlimited 1% cash back on all purchases as well as a $0-fee cash withdrawal at any MoneyPass ATM. Another contender is the ACE Elite™ Visa® Prepaid Debit Card, which offers cash back statement credits for purchases at selected retailers and restaurants.
5. What is the Best Prepaid Card to Get?
Prepaid cards are definitely not one-size-fits-all, so the best prepaid card to get depends on what’s important to you. Most folks prefer a card with minimal fees, but other considerations include:
Flexibility: Cards may offer multiple options for monthly or pay-as-you-go usage fees. We like the NetSpend® Visa® Prepaid Card for its flexible usage fees.
Budgeting: Some cards offer online/app tools to help you manage your money. The tools that accompany the BlueBird® by American Express® prepaid card let you categorize, set spending limits, and track up to four cards, both online and through the phone app.
Cash back rewards: It’s a rare prepaid card that gives you cash back rewards, but a top one is the American Express® Serve® prepaid card. The card gives you 1% cash back on all purchases made online or in stores.
Saving: If you agree that your credit card company should pay you interest on your unused card balance, then check out the Mango Prepaid Mastercard®. You can earn 6% interest when you meet certain requirements.
Direct deposit: We think the PayPal Prepaid Mastercard® is your best bet if you arrange for direct deposit of your paychecks and/or government benefits. Using the card can shave two days off the time it takes to receive your money. You can transfer funds between the card and your PayPal account, but you do need a PayPal account.
These are not the only criteria that may be important to you. For example, if you travel abroad, you may want a prepaid card with no foreign transaction fee or fee for foreign currency translation. Alternatively, you may be subject to an ATM transaction fee if you use these machines extensively.
6. What is the Best Prepaid Card with No Fees?
We’ve established that no prepaid card is 100% no-fee. But the one that comes closest to this ideal is the Bluebird® by American Express prepaid card. You can reload this card for free from several sources, including cash or a debit card transfer at a Walmart store, as well as mobile check deposit and direct deposit.
So, how exactly does American Express keep Bluebird from going bankrupt? They depend on a few fees and also brand loyalty for when you are ready (if ever) to graduate to a credit or charge card. Those few fees include:
A card fee when you buy one at retail locations.
Each cash withdrawal from retail locations other than Walmart.
Money in Minutes check capture by Ingo Money®. Money in 10 Days check capture is free.
Out of network ATM fee (such as a Chase ATM).
Ria® cash pickup.
One other cost savings shared by most prepaid cards is that you don’t need (and don’t have to pay for) a checking account. In fact, many unbanked and underbanked consumers rely on prepaid cards.
7. Do Prepaid Cards Hurt Your Credit?
Prepaid cards cannot hurt your credit because they fly under the radar of the major credit bureaus (Experian, TransUnion, and Equifax). These credit bureaus track consumer credit and loan activity, which rules out a prepaid, debit, or gift card.
By the way, a gift card is similar to a prepaid card except they usually are not reloadable.
The only conceivable way that prepaid cards can affect your credit score is indirectly, to the extent that they deter you from using credit cards to rebuild your credit. Thus, if you already have a low FICO score, using prepaid cards instead of credit cards won’t help you rebuild your score.
8. Can I Build Credit with a Prepaid Card?
Just as prepaid cards can’t hurt your credit, neither will they help you build it. Credit refers to debt, which is money you owe to creditors and lenders. A prepaid card incurs no debt, so when it comes to your credit score, prepaid cards are as neutral as Switzerland.
However, if you are willing to concede that building credit is a long-term endeavor, you may consider prepaid card usage as the first step on the journey. How? By giving you the opportunity to develop good money-management habits:
Prepaid cards are safer than cash. It’s not just that money in a lost wallet is gone forever. Many prepaid cards are insured and give you the opportunity to recover your money if the card is lost or stolen. Additionally, regulations instituted in 2019 expanded the protections available to holders of prepaid cards.
Cash spending is hard to track. When you pay for everything with cash, it’s almost impossible to budget effectively. To track your spending, you’d have to keep all your receipts every day and then transcribe them to a spreadsheet or budget software. By contrast, prepaid cards can provide you with online or printed statements that make tracking easier. Some card issuers offer apps to automatically classify and track prepaid card usage. Budgeting and budget tracking are the foundation of financial responsibility, a core activity that will help you learn to control your spending habits.
Prepaid cards require you to monitor your balance. You can’t just load your card and forget it, lest you find your card declined at your favorite restaurant or grocery store. Staying on top of your card balances is another core activity for financial responsibility.
Prepaid cards facilitate online shopping. It’s hard to take advantage of low online prices if you don’t have a plastic card. A prepaid card enables you to make card not present purchases which may result in significant savings from month to month.
Prepaid cards teach you to live without debt. Credit cards make it easy to generate debt that requires you to cough up interest charges when you carry balances. Prepaid cards are like training wheels — the money management skills they help you develop can condition you to use credit cards without carrying balances. If and when you graduate to credit cards, paying your full balance each month means a 0% APR and no money spent on interest. That’s terrible for the credit card companies but great for you.
For whatever reason, schools today just don’t teach personal finance. It’s up to you to develop good financial habits and using prepaid cards can be a helpful step in that direction.
9. How Do You Put Money onto a Prepaid Card?
When it comes to reloading your prepaid card, you’ve got options, many of which are no-fee. The ways to put money onto your prepaid card include:
Cash, checks, or money orders at retail locations. Some cards have relationships with specific merchants that provide no-fee reloading. For example, the Bluebird® by American Express prepaid card allows you to add money to your card at any Walmart checkout register without fees. Other participating retailers may charge a fee.
Reload packs: You can buy a reload pack for cash. Each reload pack has a unique identifying number. You then go online to transfer the money from the reload pack to your prepaid card.
MoneyGram/Western Union: You can enter transfer information at a MoneyGram kiosk or agent location. You don’t need the physical card with you to do the transfer. If you use Western Union Reload+, you can reload your prepaid card by swiping it at an agent location.
Debit card transfers. Prepaid cards do not require you to have a checking account. But if you do, you can use your debit card to transfer money to your prepaid cards online or at retail locations.
Electronic funds transfers: If you have a checking account, you may be able to link it to a prepaid card and electronically transfer money between the two accounts.
Direct deposit: You make a direct deposit of your paycheck and government benefits into your prepaid card account.
Mobile check capture: Some prepaid cards work with mobile apps, such as Ingo® Money, that allow you to scan a check and deposit it to the card.
Bank teller: A few banks issue prepaid cards. With one of these, you can walk up to the bank teller and cash reload your card, including with a check. You can also do a bank transfer transaction.
Before deciding on a prepaid card, check the different ways it accepts reloads and the fees for each method.
10. How Much Money Can You Put on a Prepaid Card?
The credit card company sets the daily and overall reload limits on its prepaid cards. Those limits may range from $500 to $10,000 or more for cash deposits.
For example, the Netspend® Visa® Prepaid Card limits daily cash loading to $7,500, and the overall limit on this prepaid Visa card is $15,000.
Money laundering regulations require any cash bank transfer or deposit of $10,000 or more to be reported to the federal government. This rule applies to prepaid cards issued by banks and credit unions. Other methods, such as direct deposit, mobile check deposit, and bank transfers may have different limits.
You can no longer be charged for seeking information about your card account.
If you opt for overdraft protection, the fees are capped for the first year at 25% of the credit limit. However, there is no cap after the first year.
These are good protections, but some dangers still lurk in the form of fee abuse by predatory card issuers. We recommend you decline optional overdraft protection, as it can accumulate a high overdraft fee total. Also, stay with cards that provide FDIC coverage.
12. Is there a Difference Between a Prepaid Debit Card and a Prepaid Credit Card?
No difference! Both terms refer to prepaid cards, but both are confusing. A prepaid credit card implies that the card has a credit line, but prepaid cards do not (unless you opt for overdraft protection, which we discourage).
A prepaid debit card is better, but it implies that, like a Visa debit card, it is backed by a checking account, which it isn’t.
It’s also important to understand that a secured credit card is different from a prepaid one. A secured card requires a refundable deposit, but it does extend credit to you up to the amount of the deposit. A prepaid card also requires a deposit, but it doesn’t secure a credit line. Rather, that’s the money you spend when you use the card
Why do these terms pop up at all? Some of it is marketing, as card issuers attempt to compete for online search results. In other words, there is no expectation that the average search engine user clearly understands the nuances of these terms.
13. Can I Use a Prepaid Card to Get Cash at an ATM?
Typically, prepaid cards charge nothing for cash withdrawals from in-network ATMs. Out-of-network ATMs are a different story, and prepaid cards may charge several dollars per withdrawal, plus whatever the cash machine operator may charge.
The challenge for a prepaid card owner is to locate a conveniently situated in-network ATM. That gives an advantage to prepaid cards that have extensive ATM networks.
Our top pick for prepaid cards with no ATM fees is American Express Serve®, which provides free withdrawals from the MoneyPass ATM network throughout the country.
The card charges $2.50 for each withdrawal from an out-of-network ATM. The card offers many free services, including no reload fee at more than 45,000 retail locations.
14. Do I Need a Bank Account to Get a Prepaid Card?
Prepaid cards are aimed squarely at unbanked consumers. Many millennials and Gen Z types are not big fans of banks.
In 2017, the FDIC reported that 8.4 million American households were unbanked (i.e., had no bank-based checking or savings accounts). The biggest complaints were a lack of trust toward banks and fees that were perceived to be too high.
A prepaid card provides consumers with much of the convenience of a Mastercard or Visa debit card but without the hassle and expense of owning a checking account. If you do have a checking account, many prepaid cards let you link to it for convenient money transfers. Some banks issue prepaid cards, which means you can reload or withdraw funds by visiting a local branch.
Our favorite prepaid card that requires no bank account is the NetSpend® Visa® Prepaid Card. It charges no fees for online card purchases, direct deposits, and mobile check loading. You can reload the card at more than 130,000 retail locations nationwide.
15. What Other Fees are Associated with Prepaid Cards?
We’ve identified 29 fees that prepaid cards can extract from you.
Over-the-counter withdrawals at financial institutions and/or retail locations
Transfer transactions (including Western Union, MoneyGram, Customer Service Agent, etc.)
We haven’t found any prepaid cards that charge all 29 fees, but one may be lurking out there below the radar. The best prepaid cards charge the fewest and the lowest fees.
The difference between high- and low-fee cards could cost you hundreds over the course of a year. That’s reason enough to research the best and cheapest prepaid card that works for you.
Editorial Note: Opinions expressed here are author's alone, not those of any bank, credit card issuer, airlines or hotel chain, and have not been reviewed, approved or otherwise endorsed by any of these entities.
The information on this page was reviewed for accuracy on .
About the Author
Eric Bank Finance Expert
Eric Bank has been covering business and financial topics since 1985, specializing in taking complex subject matters and explaining them in simple terms for consumer audiences. In addition to his work on CardRates.com, Eric has appeared regularly on Credible.com, eHow, WiseBread, The Nest, Get.com, Zacks, Chron and dozens of other outlets. A former software engineer, Eric holds an M.B.A. from New York University and an M.S. in finance from DePaul University.
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Advertiser Disclosure: The credit card offers that appear on this site are from credit card companies from which CardRates.com receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). CardRates.com does not include all credit card companies or all available credit card offers. See the credit card issuer's website for specific terms and conditions of each card.