Prepaid debit cards (often referred to as prepaid credit cards) are a great alternative to the classic bank account or a credit card. That’s because there are no credit checks nor late fees with prepaid cards. Many debit cards offer the same services as your standard checking account – online bill payment, direct deposit, and mobile check deposit. What’s more, you can do these things without worrying about potential overdraft fees.
Before listing the best-prepaid debit cards of the year, let’s discuss the difference between a debit card, credit card, and an ATM card a little further.
What is a Debit Card?
A debit card is a type of card that is linked directly to your checking account (for some of the best checking accounts check out our article here). You can use it for withdrawals from ATMs or as a way to make a direct payment. It’s a way of accessing funds from your bank account.
Each card is protected with a pin code that you are required to enter into the card machine whenever you use the card. When you use the card as a method of payment, the seller requests that your account hold the funds for the transaction. The seller then submits the transaction to their account. Once that is received, the funds are released and sent between the two parties.
As already noted, one downside of a debit card is the possibility of overdrawing your account. Banks usually allow you to overdraw up to a certain amount and then charge extra on each transaction.
An overdraft fee isn’t the only fee associated with a debit card. When you use your card for withdrawals at an ATM, the provider could charge you ATM fees. Some cards can provide free ATM withdrawals, but it depends on the card issuer.
The financial institution may also charge a monthly service fee on your debit card. Despite the ties to a bank account, a debit card will not affect your credit score nor appear on a credit check. This is the same case for the prepaid variant discussed below.
Like any form of electronic payments, debit cards come with some risk of fraudulent activity. If someone physically steals your card, then you have to report it to your bank immediately and cancel the card. Despite not knowing the pin, others can still use it for online purchases. The card does not even have to be physically stolen. With the right technology, someone can scan your card information at an ATM. This “skimming” of a card does happen, and someone can access the data stored on the card’s electronic strip as well as your PIN. Therefore, it is essential to check your account transactions regularly to ensure nothing is incorrect.
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Prepaid Debit Card vs. Standard Debit Card
All debit cards allow you to withdraw money from your checking account and pay for purchases. But there are two types of debit cards: prepaid and standard. Both types come in either Master Card or Visa variants (other variants are also available, subject to the card issuer) and allow cashless transactions. Both cards also come with monthly fees with the amount varying between card issuers. As with a standard debit card, a prepaid card will not affect your credit score.
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Top Advantages of Prepaid Debit Cards
Almost 68 million Americans don’t have a bank account, but given the modern business landscape, cash is not always feasible or ideal, e.g., online purchases and hotels where cash isn’t accepted. The solution then is a prepaid debit card.
Prepaid cards come with a routing number, so you can arrange to have your paycheck deposited straight to the card account without having to deal with a bank.
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You can’t spend more than you have.
The most important reason for using a prepaid card is that you can never spend more money than you have. (If you find yourself getting into debt, then check out our article here for tips on how to deal with it.)
Transaction updates are instant.
Most prepaid cards come with a mobile app so that you can log in on your phone to check what you’ve spent money on. (Sometimes, it can take time for standard debit card transactions to appear in your account.) You can even use the same mobile app to make a check deposit.
Age doesn’t matter.
There are no age restrictions for a prepaid card. This makes it a popular gift choice when you are unsure what to buy someone and don’t feel like giving them cash. It may be a one-time use card or even a rewards card that offers an incentive to keep using it after the first occasion. For example, a Starbucks rewards card is excellent for a spiced-pumpkin-latte-loving teen.
Safety is ensured.
Ensuring money is safe ranks as one of the customers’ most significant concerns. A prepaid card guarantees your money safety more than a regular debit card because it isn’t linked to an actual bank account. If the card is physically lost or stolen, however, you probably won’t deactivate it in time or reclaim the money lost. Check with the card issuer to ensure you have sufficient protection.
It’s easy to get one.
Because there are no age restrictions, prepaid cards are also easy to acquire. You don’t have to show a form of ID for most prepaid cards, but some do require a passport. Unlike a credit card, there is no need for a credit check from a credit card issuer either. These factors allow for anonymity for purchases.
Disadvantages of Prepaid Debit Cards
Although there are several advantages to prepaid cards, there are some sounds disadvantages. Interestingly, its most significant benefit is also its biggest disadvantage. If you forget to deposit funds, you can find yourself with no money when you need it. Additionally, you may have a difficult time locating an ATM that takes a prepaid card.
One final consideration is that unlike a debit card, there will be an expiration date on your prepaid card. So, if you reach that date with funds still on the card, then you’ll lose that amount with no way to get it back.
You probably have already used a prepaid card without realizing it, since you can often use them as gift cards. A specific business can issue a prepaid card, which you then must use at their retail locations and affiliates. That’s unlike a debit card that you can use almost anywhere.
Four Types of Prepaid Debit Cards
There are four types of prepaid debit cards. Each category is nonexclusive with some cards holding more than one quality:
- Open-loop prepaid card – You can use this card anywhere provided the establishment accepts the mark on the card (Visa or MasterCard usually).
- Closed-loop prepaid card – As mentioned above, this prepaid card is typically used as a gift card and can only be used at a specific retailer.
- Single-use – This card can also work like a gift card with a set amount on the card; you can use an open-loop card until the funds run out. After that, the card is useless.
- Reloadable – The reloadable prepaid card shares the same properties as the open-loop card because you can use it anywhere. This card, however, can be reloaded with money as often as needed.
Choosing a regular debit or prepaid debit card primarily comes down to personal preference and purchasing patterns. People tend to opt for a prepaid card when making one-time purchases and a debit card for long term use.
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Prepaid Debit Card vs. Credit Cards
Prepaid debit cards are sometimes called prepaid credit cards. They are not credit cards, however, and share even fewer similarities to an actual debit card. Along with a secured credit card, prepaid credit cards are a solution for bad credit. Both a secured credit card and a prepaid card require a deposit to use, but this is the end of the similarities.
The credit card issuer owns the money on a credit card, and you are borrowing their money when you use the card. You are then required to pay that money back to the credit card issuer, usually next month. If you are late paying the money back, the issuer will most likely charge interest, i.e., a percentage of the amount owed. (The interest rates are often high on credit cards, so it’s best to pay the amount owed in full and on time.) The money on a prepaid card is your money, and when the card is empty, you need to reload more money to use it again.
To own a credit card, you must go through a credit check. If you use the card responsibly, you can see an increase in your credit score. There is no credit check for a prepaid card, so you won’t be turned down because of poor credit history.
Prepaid Cards & Protection
A prepaid card is safer to carry than cash and less prone to fraud than a debit card. What if the card is stolen and used for fraud though?
As of October 2020, the Federal Deposit Insurance Corporation (FDIC) approved prepaid cards to have the same protection as standard debit cards. Before that time, you were only insured for only cards used for issuing payroll. The current ruling states that the funds on the card are insured up to $250,000 with a consumer liability of $50.
Terms to Consider
You should note that this $250,000 is not per account. If you hold a checking or any other account with the same bank that issues the prepaid card, then your total money is insured up to $250,000. This reassuring insurance, however, does not cover all prepaid cards, as you must follow these specific terms:
- The bank issuing the card must be an FDIC member.
- The FDIC-insured bank must have records of the registered cardholder, which means that the issuer must have proof of the amount in the account and the name of the owner. This proof is not necessary with all cards, but keep in mind that if you opt to stay anonymous, you will waive any insurance rights.
- Only you and other assigned-users can make the deposits.
Provided you satisfy these three terms, you’re protected by insurance.
Another benefit of getting a card from an FDIC bank is that if the bank fails, your funds are protected.
Despite the insurance offered, disputing charges will always be easier with a credit card. Insurance or not, you should always report suspicious activity with any of your accounts as soon as you notice it.
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Best Prepaid Cards of October 2020
There are as many prepaid cards available as there are incentives to use them. These incentives include cashback rewards, reward points, and even zero monthly fees. You’ll find some of the best options available to you below, but keep in mind that preferences vary. Maybe you want one that has low or no annual fees or one that offers a wide range of usability. Or, perhaps you want one with no ATM withdrawal fees. Additional reward points are a bonus, but rewards tend to come from retailer issued cards.
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American Express Serve
There are three types of American Express Serve cards:
The basic American Express Serve card, along with the other two serve cards, are easily obtained for free online or purchased for $3.95 at a retailer. The monthly fee is incredibly low at only $1 and up to $3.95 per reload. These fees may not apply if you use your card regularly. The issuer will even waive your monthly fee if you set up a direct deposit of $500 on to the card each month.
The use of ATMs for withdrawals is costly, with a $2.50 fee for each application. You can avoid this fee if you use a MoneyPass ATM (there are around 24,000 nationwide). There is also a high foreign transaction fee of 2.7%, so not an ideal card if you are looking to travel.
Another consideration is that this card – and any American Express card – isn’t as widely accepted as a Visa or Master Card.
American Express Serve Free Reloads
The American Express Serve Free Reloads card is the next reloadable prepaid card, which lets you make free reloads onto the reloadable card. Reloading is free (instead of the $3,.95 fee with the basic card) at over 40,000 locations, including Walmart and 7-Eleven. There is also no fee to transfer money to the card from a bank account. As with the basic card, withdrawals are free at MoneyPass ATMs with a $2.50 fee at other ATMs. Although there is no reload fee, there is a monthly fee of $2.95 for using this card.
American Express Serve Cash Back Card
The American Express Serve Cash Back Card is one of the few prepaid cards that offer cash back rewards. You can gain 1% cash back for every dollar you spend on online purchases, so if you like to shop online, this card is for you. That 1% also applies to in-store purchases as well.
The cash back is a nice reward, and account updates are instant, so you don’t have to wait to get that extra cash. If you can spend over $795 monthly, then you will break even on the monthly fee, which is the highest of the three Serve cards. The same $3.95 fee for reloads applies and a $2.50 ATM charge unless used at the MoneyPass ATMs. The cash back is a great bonus, but as noted before, American Express is not as widely accepted as other formats. This downside is the same for the next card on our list.
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Bluebird by American Express
The Bluebird card is yet another reloadable prepaid card from American Express, and it comes with nearly zero fees. There is no monthly fee and reloading the bluebird card with cash is free at multiple locations. If you order the card online, you can even save on the activation fee. As with the other American Express cards, MoneyPass ATMs are free for withdrawals, but you are charged $2.50 if you use other ATMs.
The card cannot be linked directly to a bank account, but it can be a substitute since the card comes with useful money managing the mobile app. This card even acts as the primary account for four sub-accounts, each with its own card. You can set spending limits on the four sub-cards and track their purchases from the mobile app. The Bluebird card is a great tool not only to teach young adults good budgeting habits but also to manage family spending.
Netspend Prepaid Card
The first non-American Express reloadable prepaid card on the list is the Netspend Visa Prepaid Card. A Visa card means more options for consumers. If security is a concern, then this could be an excellent card for you because it offers several useful features. For example, when making online purchases, you can opt for a one-time card number so that your actual card number remains hidden in case of data breaches or hacking attempts. Unlike most prepaid cards, your funds are protected from fraudulent purchases if you inform Netspend right away.
The Netspend card also comes with a handy mobile app so you can track your transactions and balance anytime. There three different plans for this card:
The Pay-As-You-Go plan is the most basic option. There is no monthly fee, but each signature transaction is $1 while each pin transaction is $2. You can avoid these transaction fees if you opt for the Netspend FeeAdvantage or the Netspend Premier FeeAdvantage. Both of these card programs charge a monthly fee of $9.95 and $5.00, respectively.
The Premier FeeAdvantage plan is the best choice with the lowest fees, even though it requires a monthly direct deposit of $500 to keep activated. Also, if you don’t use the card for over 90 days, Visa will assess a $5.95 inactivity fee. As far as reloading, fees are average usually just $3.95 per session. The Netspend card is not connected to any ATM network, so you will pay a fee for any cash withdrawals.
Pink Netspend Prepaid card
The Pink Netspend Prepaid card can be used almost anywhere. This card is trusted by over 7 million cardholders already because it offers no interest charges and no minimum balances.
These factors, combined with the Visa mark, make it a sound all-round card. There is a $9.95 monthly fee, as well as a $2.50 withdrawal fee at ATMs, so consider these points when selecting the best card for you. These rates are for the FeeAdvantage version of the card with the Pay-As-You-Go version offering no monthly fee. It carries the same transaction fees as it is counterpart mentioned above – $1 for signature transactions and $2 for pin transactions. The good news – there is no activation fee.
If you load the card with a direct deposit, then you can get the money two days earlier than usual. Bottom line – this is a simple, no thrills card for someone who wants an alternative to a debit card.
To activate any Netspend card under these three programs, you will have to give more details than other prepaid cards, namely your name, address, social security number, and date of birth. Activating the card can be done online or over the phone.
Chase Liquid Prepaid Card
The Chase Liquid reloadable prepaid card is a bank-issued prepaid card. It is excellent for those who are already Chase members. Cash reloads are free in all branches and at registered free ATMs. Just note that nearly half US states do not have offices.
The card comes with similar advantages to a Chase checking account, such as bill payment and Chase quick-pay. The last advantage, Chase quick-pay, is a unique payment method offered with the Chase checking accounts that let you pay anyone. You can even pay those who wish to receive a check. Make the payment via the mobile app and Chase sends the check for you.
The Chase Liquid card has a lower than average monthly fee of $4.95, not the cheapest but more economical than other competitors. There is a standard $2.50 withdrawal fee at non-chase ATMs. One fee to especially note is the bounced-check fee. If you attempt to issue a check with your prepaid card account and the check gets declined when someone cashes it, then a $12 fee applies.
If you are in an area with a heavy Chase presence, then the Chase Liquid card and its bill payment options are ideal for you. If there are no close branches, however, then there are better alternatives.
Starbucks Rewards Visa
Retailer-issued cards tend to have high fees and limited usability. But there is one notable exception – the Starbucks Rewards Visa. It’s a prepaid business debit card from Visa, so you use it nearly anywhere. There are better reward cards available, but if you get your daily morning coffee fix at Starbucks, then this your card.
There are no reload fees with this card, but there is a $25 minimum amount. If you intend to use the card for cash withdrawals at an ATM, then this card is doubly right for you. There is no ATM support with the Starbucks Rewards Visa though. In addition to zero reload fees, there are also no monthly fees. Coupled with the fact that this card is free to obtain, it is easy to see why it’s one of the lowest fee cards to own.
The rewards program works on a point basis. You can earn up to three stars per $1 spent with 150 Stars earning you a latte or any other handcrafted beverage. You can make an introductory bonus of 6,500 stars if you spend $500 with the card in the first month. That’s a lot of free Starbuck’s coffee.
PayPal Prepaid MasterCard
Elon Musk may have revolutionized payment processing with PayPal, but the PayPal prepaid master card is not as revolutionary. That’s not to say it’s a bad card by any means; it’s just not the “Tesla” of prepaid cards.
The standout feature of PayPal prepaid is that you can reload the card directly from your PayPal account. It is also a MasterCard, so it comes with similar advantages to the Visa cards mentioned above. Besides reloading via PayPal, you can also use a Net Spend Reload Network location, but it will cost you $3.95 per reload. And although reloading via PayPal is free, there is nevertheless a $300 limit per day. Furthermore, the card does, unfortunately, come with unavoidable ATM fees (usually $1.95 fee plus any ATM operator fees). There is even a $1 fee if the ATM rejects the card.
You can get cash back rewards provided you use the card consistently. Unless you have a PayPal account, the fees may be too high to justify. Consider this: other cards do the same thing, but without the need for the cardholder to own a PayPal account.
If you wish to avoid the hassle of transferring funds from your PayPal account, then the PayPal debit card is better. You can use the PayPal debit card to take funds directly from your PayPal account.
Walmart MoneyCard Visa with Cash-back Rewards
The Walmart MoneyCard Visa is another retailer-issued card, and you can use it anywhere that accepts Visa or MasterCard. As expected, Walmart customers get the most out of this prepaid business debit card. The card offers 3% cash-back rewards on purchases from Walmart.com and 1% in stores. Cash back is capped at $75 per year.
You can cash checks with your mobile app for free, as well as pay bills with no transaction fee.
Reload fees vary but can go up to $5.95 depending on the method and locations. Withdrawals at an ATM cost $2.50. A downside to this card is that you need to load $1,000 in a month to avoid the $5 monthly service fee.
Like most retail-issued cards, this card is an excellent option if you use their store a lot. However, there are better options available that offer cash back rewards, such as the American Express Serve Cash Back.
Kroger Rewards Prepaid Card
Another rewards card issued by a retailer is the Kroger Rewards Prepaid Card. Kroger is one of the largest grocery chains and has used this version of the card since 2018 when they replaced their original 1-2-3 Rewards Prepaid card. The card is a Visa card so you can use it in-store or online.
The significant advantage to this card, as the name suggests, is the rewards program. The card offers a points system – 3 points for every $1 spent on Kroger branded products; 2 Points for $1 spent in a Kroger store; and 1 point for every $1 spent elsewhere. You can redeem a thousand points in the store for $5 worth of groceries. Rewards are not limited here, however. There is a 5 cent per gallon discount on fuel purchased at Kroger gas stations. There is also a $10 reward when setting up the card to receive a direct deposit.
The original 1-2-3 Kroger Rewards card offered free ATM withdrawals, but the latest version doesn’t offer this reward. You are allowed one free ATM withdrawal per month. After that, withdrawals are $2.50 no matter the ATM provider. You can avoid these fees if you use a MoneyPass ATM. There is no activation fee, but there is a $4.95 service charge per month. You can even cash checks using the mobile app.
Mango Visa Prepaid Card
The Mango Visa Prepaid card is both a prepaid debit card and a savings account. The card charges a $3 monthly service fee and $2 ATM fee. Reloading cash can cost a fee of up to $5.95 and is only possible at registered Greendot locations. All of these are standard rates for a prepaid card.
Where the Mango Visa prepaid Card distinguishes itself is its savings account option. You can open this account with as little as $1, and as long as you meet the deposit requirement, you can claim interest on your savings. If you can meet the direct deposit requirement of $800 a month, then you will earn 6% APY (Annual Percentage Yield) on direct deposits up to $5000. Even if you can’t make direct deposits of $800 or more, you will still earn 2% APY. This card comes, unfortunately, without mobile access, which is a standard feature with the other cards listed. The card is also unable to cash checks via a mobile app.
AccountNow Gold Prepaid Visa Card
The AccountNow Gold Prepaid card is one of the original prepaid cards. As with the other cards, you can add money via direct deposit. Your employer can also direct deposit your salary straight to your card. If you add money with a direct deposit, you will gain a $15 bonus. This card also comes with an exciting refer-a-friend feature. Refer your friend to an AccountNow card, and you will receive a $20 bonus for yourself and a $10 one for your friend.
The original AccountNow prepaid card had no monthly service fee, though it did have a $1 charge for signature purchases and $1 for pin purchases. These features are gone leaving only the Gold card that charges a $9.95 monthly fee instead of purchase fees. The monthly fee is high compared to other cards, and there is no way to reduce it. There is no activation fee. The gold card also features ATM withdrawal fees up to $2.50. This is a simple prepaid card with average fees. Another cool feature is that you can transfer your tax refund directly to your card.
RushCard Prepaid Card
The RushCard prepaid card does not have an activation fee and allows you to select from two plans:
The pay-as-you-go plan will enable you to replenish the card as you use it. There is also a $1 charge for purchases no matter if they are a signature or pin purchase.
The Rush Unlimited plan is a monthly plan for those consumers looking to get more extended use of the card. You will pay $5.95 a month if you set up a direct deposit or $7.95 if you opt to make the payments manually.
The RushCard also offers a refer-a-friend feature – $30 for each friend you recommend up to $600 a year. Rush also lets you set saving goals with flexible amounts. You can then set up a savings account, and Rush will reward you $2 for keeping more than $500 in that savings account. Unfortunately, this account doesn’t earn any interest.
So…What’s the Deal with Prepaid Debit Cards?
A prepaid card is useful, especially if you have a less than stellar credit history preventing you from passing a credit check. If you want to increase your credit score but can’t get approved by a credit card issuer, then a secured credit card is a reliable option. You can use it for purchases while simultaneously strengthening your credit.
Maybe your credit score isn’t the problem, but overdraft fees on a standard debit card concern you. Many people have a credit or debit account AND a prepaid card because it gives them extra control to manage their finances.
Prepaid cards’ various fees may frighten you initially, but they are beginning to decrease. Prepaid cards are growing in popularity as more consumers use them like checking accounts. In 2012 approximately $65 billion was loaded onto prepaid cards, and that number is climbing. Prepaid cards are here to stay, so issuers need to be competitive to survive. This competition will inevitably lead to lower and lower fees.
As of right now, there is no best-prepaid debit card for everyone; there is only the best one for you. Depending on what options work best for you and your family, you may choose a card that offers impressive rewards or one with lower fees. One recommendation is Rush Card Prepaid card because it provides the flexibility to select a plan. Or maybe the Mango Card with its enticing saving scheme that provides a better savings account APY.
No matter your choice, prepaid cards are easily accessible and convenient. Do you have a favorite card on this list? Or have you found the one prepaid debit card that everyone should use? Please share your experience below.