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Prepaid debit cards are a great alternative to traditional bank accounts. Many offer the same features as a checking account – online bill pay, mobile check deposit and direct deposit – without the overdraft fees. All the prepaid debit cards on our list come with great features and perks, some even allow you to create sub-accounts with their own prepaid cards. The key is to pay attention to the fees, so you can choose the best prepaid debit card that will minimize the number of fees you pay.
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Prepaid cards are cards that you load money onto, typically through direct deposit, cash or check deposits, and online transfers from a checking account.
There’s no line of credit, so you can’t run up debt on the card.
But it’s important to be aware that these cards won’t help you build credit. Since you’re not borrowing money from a credit card issuer, your account activity isn’t sent to the credit bureaus. If you want to build your credit, consider applying for a secured credit card.
Here's how it works: You purchase a prepaid debit card online or at a retailer. Then you load cash onto the card and use the balance for purchases.
The most egregious fees are “transaction fees”. None of the prepaid debit cards on our above list will charge you a fee each time you use them to pay for something. However, it is not unheard of for some cards to charge as much as $1 for each swipe of your card.
Checklist for evaluating a prepaid debit card offer:
--Does the card have a monthly fee? If so, it should not be greater than $5.95
--If a card charges a monthly fee, what do you get out of it? Why this card, instead of a "no fee" option
--On the topic of fees, make sure the card does not charge you a fee with every purchase
--Before applying, search for online reviews. Some cards may charge hidden fees that may not be immediately obvious, and other users might have reported them
You should consider getting a prepaid debit card in these four cases:
If you can’t open a free or low-cost checking account. People who have a history of not paying bank fees or overdrawing their account will get flagged in ChexSystems, which is a special credit system that banks use.
1. If you can’t open a free or low-cost checking account. People who have a history of not paying bank fees or overdrawing their account will get flagged in ChexSystems, which is a special credit system that banks use.
2. If you don’t like certain bank fees, like overdraft or service fees. Most banks offer some free checking options but, if you overdraft your account often, you’ll rack up fees.
3. If you don’t want online purchases to have any link to a bank account or credit card. You can limit the amount of money on the card so, if anyone got ahold of your information, your downside is limited to what’s on the card instead of your entire bank account!
4. If you want to use a prepaid card to issue your kids gas money, allowance, or college-spending cash. This ensures your kids don’t go rogue and overspend on the family credit card.
1. Shopping around for the best prepaid credit cards on the market
Compare the different features available on a card alongside the fees being charged to see if it’s worthwhile for you. We’ve done the majority of the work for you and made a chart of the better cards available below.
2. Setting up direct deposit
Since many cards will forgive the monthly fee if you load a certain amount of money onto your prepaid credit card each month, it’s a good idea to set up a direct deposit that automatically goes onto your card. This way you’ll always have that money in the account for you to access and reach the monthly load limit with ease. This can be your paycheck, social services payments, etc.
3. Using free online services
Some prepaid credit cards will charge you for checking your balance over the phone, while others do not. You can avoid these charges altogether by using the free online resources that let you manage your account on the computer or mobile devices.
4. Avoiding ATM withdrawals
Many prepaid credit cards will charge you for ATM withdrawals. Plus, you’ll have to pay whatever service charge the ATM provider charges. This makes each transaction more expensive than other options. In general, purchases are the best way to spend money with your prepaid credit card.
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