The Scoop on Prepaid Debit Cards
Okay, we gave you the lowdown on the best prepaid debit cards above, but perhaps you still have a question (or 10) about prepaid cards in general. Not a problem - we’ve got answers to questions you didn’t even realize you had! Taking risks with financial products isn’t something most folks like to do, so look through the helpful info below before you select a prepaid debit card.
What is a prepaid debit card?
A prepaid debit card, often called a prepaid card, is a card that functions like a traditional debit card with some minor restrictions (more on that later). You deposit funds in advance, and you usually can’t spend more than you have in your account. One well-known exception is Netspend, which allows qualifying cardholders to overdraft up to 3 times per month. Each approved overdraft occurrence has a $15 fee, but that’s half the price of the average overdraft fee at a traditional bank.
You can use prepaid cards to shop 'til you drop, stuff your face at restaurants, or remain on good terms with your utility providers. Some people use prepaid debit cards to save money for vacations, birthdays, or special events because it keeps them from draining their regular bank accounts.
How do prepaid debit cards work?
Prepaid debit cards work almost the same way that traditional debit cards work. You fund your card, and then you spend (or better yet, save) the money that’s on the card. One notable difference between prepaid cards and regular debit cards is that you generally fund prepaid cards somewhere other than a bank, like at Walmart or a gas station. The exception is if you have a prepaid debit card or secured credit card through a brick-and-mortar bank or credit union.
Is a prepaid debit card the same as a prepaid credit card?
People often use terms like “prepaid debit card” and “prepaid credit card” interchangeably, but they shouldn’t. A prepaid debit card is generally used as an alternative or supplement to a regular bank account, and it doesn’t affect your credit. Well, we take that back - if you rack up fees on your prepaid debit card account and refuse to pay them, the company might send you to collections. That would go on your credit report.
A prepaid credit card is a card that’s backed by a deposit, and it’s usually known as a secured credit card. A secured credit card helps you establish or repair credit using your own money rather than funds from the credit card company. Your balance and payment history show up on at least one of the three main credit bureaus, so make sure you pay on time. If you don’t, you might get hit with a late fee - and a significant decrease in your credit score.
How do you get a prepaid debit card?
You can request a prepaid debit card online or pick one up at a gas station, supermarket, check-cashing store, or Walmart. Some banks also offer prepaid debit cards, but you’re more likely to find them at retailers.
Many prepaid cards are free, but some places charge a few bucks for them. You may need a photo ID when you buy the card, but you probably won’t need the mound of documents that traditional banks often request. The process for getting a prepaid card is usually quick and simple.
How do you put money on a prepaid card?
The deposit process for your prepaid debit card varies depending on which company you use. Walmart lets you deposit cash, money orders, or checks on Bluebird cards by visiting the Money Center. Some Walmarts also let you add cash at the service desk and registers, and we’ve even seen stores with special ATMs that accept cash deposits for the Bluebird card. You can also mail checks or money orders to Bluebird or use the check-capturing feature on the mobile app for virtual deposits.
Most prepaid debit cards we’ve researched accept virtual deposits. There are sometimes long wait times of 7 to 10 business days for checks to clear, so deposit paper checks ASAP if you need them for an important bill. You may also have the option to fund your account with a traditional debit or credit card, which is awesome if you forgot you set up your prepaid account for automatic billing and need to make sure a payment clears.
Can you use direct deposit with a prepaid debit card?
Prepaid debit cards used to get a bad rep as outdated and inconvenient because they didn’t accept electronic deposits. Times have changed, and we can’t think of a single prepaid debit card that doesn’t let cardholders use direct deposit. There are limits, though, so keep that in mind if you’re raking in the moola each pay period. Some cards limit direct deposits to $5,000 or $10,000 per payment, and we’ve seen a couple cards that don’t let employers or government agencies deposit more than $2,000 at a time.
If you’re expecting an unusually large deposit, like for a federal tax return or a lump sum for a long-awaited SSDI payment, contact your card company in advance. They may make an exception and push the deposit through instead of flagging your account.
How much money can you have on a prepaid debit card?
Unless you’re planning to win the Powerball or rake in some major cash from your job, you probably won’t exceed the balance limit on your prepaid debit card. Most prepaid cards, including Bluebird by American Express, cap your total account balance at $100,000. This differs from traditional checking and savings accounts because banks usually let you deposit as much money as you want. However, traditional bank accounts are legally obligated to report cash deposits of $10,000 or higher to the federal government. You can’t fully avoid money-related restrictions unless your savings account consists of an envelope under your mattress.
If your income barely exceeds your bills, you may find it comforting that the majority of prepaid debit cards don’t require you to maintain a specific daily or monthly balance. You probably won’t get hit with hefty maintenance fees or threatened with account closure if you only have a few bucks in your account.
Can you use a prepaid debit card online?
You can shop online with a prepaid debit card as long as your purchase price doesn’t exceed the balance in your account. You also have to make sure the website accepts your card carrier. For example, you can’t use the Bluebird card if a vendor refuses American Express payments, and you may have trouble shopping from overseas companies if your card doesn’t cover international transactions.
Why do people choose prepaid debit cards over regular debit cards?
Prepaid debit cards have numerous benefits when you compare them with traditional debit cards, including:
- Cheap or nonexistent monthly fees
- No credit check
- Little to no chance of overdrafts or bounced checks
- Hard for debtors to garnish
Some people prefer the anonymity of a prepaid card. As with traditional debit cards, your deposits are still traceable by the federal government, but you don’t have to drop off funds in person (unless you want to). Many prepaid cards let you deposit funds from your smartphone, and some special ATMs accept cash deposits for prepaid cards.
You can use a prepaid debit card to save for special occasions or unexpected emergencies. Some people use their prepaid cards to escape abusive situations because they provide a secret way to save money. People also use prepaid debit cards to hide funds from significant others who battle addiction issues or find it difficult to stick to a budget. If you have children, you can create a family account through Bluebird or other prepaid debit card providers and transfer funds directly to their accounts in just a minute or two.
Which prepaid debit cards are the best?
After hours upon hours of detailed research from a combination of reputable sources and personal experience, we compiled a list of the 6 best prepaid debit cards above. In case you don’t have time to scroll up and check it out, we’ll list our favorites here:
- American Express Serve
- Green Dot Prepaid Visa
- NetSpend Prepaid Visa
- PayPal Prepaid Mastercard (we talk more about this card in a bit)
- American Express Bluebird
We also put the secured Capital One MasterCard on our list of the best prepaid debit cards even though it isn’t technically a debit card. That’s because many people mistakenly assume prepaid debit cards and prepaid credit cards are the same thing, so we wanted to include it in case it helps you find the perfect card for your lifestyle.
PayPal-Related Questions About Prepaid Cards
What is the PayPal prepaid debit card?
The PayPal prepaid debit card is a MasterCard for PayPal account holders. The card lets you access the funds in your PayPal account without transferring them to a verified bank account or sending them to an authorized payment center. You can apply for this prepaid debit card if you do not have an existing PayPal account, but you receive limited access to the features and benefits (like online card services) that PayPal members have.
Apply online if you want to skip the purchase fee, or pick up a card at a participating retailer. If you buy this card from a retailer, you’ll have to pay a fee for the MasterCard plus immediately load at least $10 or $20 into your account. You can’t load more than $500 the first time you add money to the card.
Are there monthly fees for the PayPal prepaid MasterCard?
You’ll shell out a monthly fee of $4.95 per month for the PayPal prepaid MasterCard. If you’re concerned about the fee, talk some of your friends into getting a card. You receive $5 for each qualifying referral. You can also earn cash-back rewards on some purchases, so that helps make the monthly fee less of a hassle.
Can you have a regular PayPal debit card and a prepaid PayPal debit card?
PayPal doesn’t make you choose between a regular PayPal MasterCard and a prepaid PayPal MasterCard, so feel free to apply for both if you want. We’ve discovered that many freelancers, eBay sellers, and business owners who store the majority of their earnings in PayPal have both cards. That way, they still have immediate access to their funds if one of the debit cards gets lost or stolen.
Think that you don’t mind waiting? Keep in mind that PayPal is notorious for taking weeks to issue or replace debit cards, and people have been griping about the long wait times for years. For this reason, it may be beneficial to have your prepaid PayPal debit as a backup in case your regular PayPal card disappears.
Can you verify your PayPal account with a prepaid debit card?
Depends on the card. Although PayPal’s FAQs no longer state that you can’t verify your account with a prepaid card, forums are filled with comments from frustrated prepaid cardholders who can’t link their cards. If you want to verify your PayPal account with a prepaid card, make sure it’s one that collects your personal billing information. Your billing address for your prepaid card has to be the same as the one on your PayPal account or the system won’t approve your verification request.
PayPal does let users verify their accounts with the PayPal prepaid MasterCard. We’ve also heard that PayPal approves verification requests from Green Dot cardholders.
But why does verification even matter? Well, PayPal has spending and withdrawal limits for members who aren’t verified, and many of those limits are lifted after verification.
Can you use a prepaid debit card as a backup source of funding for PayPal purchases?
Yes, as long as the prepaid card meets the qualifications outlined above. Make sure your prepaid debit card and PayPal account have the same billing address, and remember that some prepaid cards aren’t compatible with PayPal.
Is my money safe on a prepaid debit card?
For the most part, yes. Prepaid cards often proudly state that they’re backed by the FDIC, which is a fancy way of saying you don’t lose your money if the company that issued your card files for bankruptcy. We can’t recall seeing any prepaid cards during our research that weren’t protected by the FDIC.
Other security measures are in the works, but they don’t kick in until April 1st, 2018. These new guidelines mimic the requirements that traditional banks honor, including:
- Opt-in options for fee-based services
- Fees explained in simple terms rather than sandwiched in thick brochures
- No late fees for overdrafts during the first 21 days your account goes negative
- Dispute process in place for fraudulent transactions
- Complimentary online access to account-related documents
Even though the changes don’t start until 2018, many card issuers have already started implementing them.
Can you overdraft a prepaid debit card?
You generally can’t overdraft a prepaid debit card as easily as you can overdraft a traditional checking account. Many companies only let you spend what’s in your account, so it’s not possible to dip below $0. There are exceptions, though, like if your cardholder charges a monthly fee and you don’t have the funds to cover it.
You can also end up with a negative balance if a company places an authorization hold on your card (more details on that in the section about hotels and rental cars). We’ve heard reports of cardholders ending up with a negative balance after paying at the pump for gas, which is probably why many prepaid cards require you to pay the cashier directly when you get fuel. If you’re wondering why gas can mess with your balance, it’s because some gas stations just preauthorize your card for $1 and charge the final fee a couple days later.
Do hotels and rental car companies place a hold on prepaid cards?
If you’re renting a vehicle or booking a hotel room, there’s a good chance that the amount they initially debit your account might change. Could be less, could be more - depends on how long you keep the rental and whether you take good care of it.
This happens with traditional debit cards and credit cards, so you’re not being punished for having a prepaid account. However, it can put you in a bind if you’re traveling and need money for gas or food. Contact the hotel or rental company before they run your card; many of them are happy to share the amount of the preauthorization hold. You can also pay with cash and ask the company to only use your card as a backup if your charges exceed your payment, but this doesn’t always prevent hefty holds on your account.
Do you need good credit to get a prepaid debit card?
You don’t need good credit - or any credit, for that matter - to get a prepaid debit card because the card issuer does not run a credit check. The exception is if you’re currently going through a bankruptcy. The prepaid card companies probably won’t know or care, but your bankruptcy trustee may request that you don’t open new accounts until your case is discharged.
Regardless of credit, you may have an issue getting a prepaid debit card if you’ve burned the company before. For example, PayPal might not give you a prepaid debit card if you currently have a negative balance. Other companies might deny your request if you recently had an account shut down for violating the card issuer’s guidelines. Aside from those issues, it’s very difficult to get rejected for a prepaid debit card.
Fees and Costs Related to Prepaid Debit Cards
How much are Visa gift card fees?
Fees for Visa gift cards vary depending on where you buy them. We usually see processing fees of $3.95 or $4.95 for Visa gift cards sold at retailers, but you also have to pay the price of the card. Cards are generally sold in $25 increments.
You can also buy Visa gift cards online. Processing fees generally range from $2.95 to $7.95, plus the cost of the balance on the card. Keep in mind your recipient might get charged a monthly account fee or get hit with charges if they don’t use the card within 6 or 12 months.
How can you avoid fees for a prepaid debit card?
We hate to bear bad news, but many prepaid card fees are unavoidable. However, we’ve got tips to help you avoid some of the fees associated with prepaid debit cards:
- Request a prepaid card online instead of picking it up from a retailer. This may help you avoid a processing fee.
- Follow the guidelines established by the issuing company.
- Refer friends to cancel out the money you spend on monthly maintenance fees (the PayPal prepaid Mastercard and RushCard both currently pay for referrals).
- Avoid overdrafts whenever possible if you’re using a card that provides a purchase cushion.
- Withdraw funds from ATMs in your network when you can.
- Pay attention to international fees if you’re traveling out of the country with your card.
If you get hit with an unexpected fee, don’t hesitate to contact the card company. Sometimes they’ll waive fees if you ask nicely or have a valid reason why you don’t feel you deserve to pay them.
Are prepaid cards free?
Sometimes. We discussed fees a bit above, but we didn’t really talk about which cards have fees. Every prepaid card we’ve researched has some sort of fee, but you can avoid monthly maintenance charges if you request an American Express Bluebird card. In general, that card seems to have very few fees when compared with other prepaid cards. There are prepaid debit cards issued by MetaBank that have no monthly fee, but you get hit with fees for ATM balance inquiries and other common card-related activities.
As far as costs go, the American Express Serve debit card comes in second with a budget-friendly $1 monthly maintenance fee. Avoid cards from The Bancorp Bank if you’re looking for low monthly fees; most of them charge nearly $10 per month.
Where can you buy a prepaid MasterCard or Visa?
You can usually request a prepaid debit card online from the company that issues the card you want. If that’s not an option or you need the card ASAP, try the following places:
- CVS Pharmacy
- Gas stations
- Check cashing stores
- Payday loan providers
- Liquor shops
- Traditional banks
You can also get a prepaid debit card from some tax prep places, but they usually only give them to people who file a state or federal return.
Can a prepaid debit card be garnished?
We’re not saying you should hide from legal garnishments and bank levies, but we’ll admit it’s usually more difficult to garnish a prepaid debit card than it is to garnish a traditional bank account. For starters, the person suing/garnishing you has to know about your account. If you’re being garnished by a government agency such as the IRS, they probably know your account exists.
Also, keep in mind that some debtors send garnishments directly to your employer. That means your job can garnish your paycheck and then give you what’s left, and there’s no legal way around it (well, unless you file bankruptcy - but we’re not saying you should do that either).
If you try to hide from a garnishment, you might end up with a lien on your property. Government agencies can place a lien on your car, home, boat, or other valuable assets. The same goes for agencies such as Child Support Enforcement or the equivalent in your state.
Can a kid have a prepaid debit card?
If your kid is at least 13 years old then yeah, you can probably add them to your prepaid account as an authorized user. Younger kids who want their own card might have to stick with Visa gift cards rather than applying for a long-term prepaid account.
Kids usually can’t get their own prepaid bank account until they turn 18, but the rules vary by company.
What is the SMIOne card?
The SMIOne card is the answer to your prayers if you’ve got an ex who swears the child support check they never sent is in the mail. SMIOne works directly with the agencies that collect child support, and then it deposits funds from the noncustodial parent directly on a prepaid Visa card a couple days later. If you’re waiting on a garnished tax refund from the noncustodial parent, expect to wait anywhere from 30 days to 6 months. This gives the noncustodial parent time to file a claim arguing that they should get to keep their refund.
Once you have an SMIOne card, you can use it for payments other than child support. It’s commonly used for direct deposits related to government benefits, employers, and the IRS. You can use the card anywhere Visa is accepted, and you usually get one free ATM withdrawal each time funds are deposited. Guidelines vary by state.
Did we forget anything? Share your questions or opinions about prepaid debit cards below. We’re here to help!