A prepaid card lets you spend money that you’ve already added to the card. It’s similar to a debit card but doesn’t require a bank account.
If you want to use a prepaid card, it requires a little more beforehand work on your part than a debit or credit card.
Prepaid cards typically carry a lot of fees, though they vary by card. Fees can include ones charged for:
Needless to say, you should be crystal clear on any fees a given card is going to charge you before you take the plunge with a prepaid card.
Prepaid cards can be helpful for people who for one reason or another can’t or don’t want to use traditional debit or credit cards. While anyone can get one, people often use them if they:
Like any financial product, consider the trade-offs before sinking your money into a prepaid card:
|Don’t need a bank account
|Many fees; high fees
|If lost or stolen, you can’t lose more than what’s on the card
|You can’t borrow or charge more than what’s loaded
|Limits your risk of identity theft
|Doesn’t help build or repair credit
|Use them at many places
|Won’t pay you points or rewards for spending
If you’re trying to choose which piece of plastic to add to your wallet, it’s helpful to know the differences between prepaid, debit, and credit cards.
|When do you pay?
|Before you spend
|When you spend
|After you spend
|How much can you spend?
|Only what you load onto the card
|Only what’s in your bank account (or you’ll face overdraft fees)
|Up to your credit limit
|Charge many fees?
|Typically no (unless you overdraw your account)
|Some charge annual fees; interest charges if you carry a balance and late fees if you miss payments
Before you purchase a prepaid card, you should know:
A prepaid card lets you make purchases up to the amount you’ve loaded onto the card. It’s similar to a debit card but doesn’t require a bank account. Anyone can use prepaid cards, but they typically come with many fees and won’t help you build or repair your credit the way a credit card can.