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What Are Prepaid Debit Cards — and When Might You Use One?

Debit Cards

In basic terms, a prepaid debit card is a card that you place money onto in advance. 

You can then pay for purchases like you would with a debit or credit card, only the money is being taken directly from the stored amount of money on your prepaid card. 

Let’s take a closer look at how prepaid debit cards work and when you might need to use one.

What are prepaid debit cards?

Prepaid debit cards are typically issued by banks and major credit card companies like MasterCard, Visa, and American Express. Though, that doesn’t mean prepaid cards work the same as debit and credit cards. 

As explained in the introduction, you simply load whatever amount of money you want to store on a prepaid card, as you would with a store gift card, and then spend that money as required.

When you have spent the amount of money stored on your prepaid debit card, you can simply reload the card with more money. You can usually do that at an ATM, online, or at a participating store. 

Even though credit card companies often issue prepaid cards, and you’ll often see logos of the likes of Visa and Discover on them, prepaid debit cards are different from credit cards because you are spending money you have loaded onto the card in advance rather than borrowing money from the credit card company as you would when using credit cards or taking money from your bank account as you would with debit cards. 

However, some prepaid card providers do offer credit. But in general, you can’t spend more than you have previously loaded onto your prepaid card. 

You can use prepaid cards for any transaction that you would use a regular debit card or credit card for, including online payments. 

Typically, recipients of payments won’t even be aware that you’re using a prepaid debit card.

When might you use a prepaid debit card?

People use prepaid debit cards for different reasons. 

A prepaid card can be a useful alternative to cash, especially if you’re somewhere where you don’t want to carry around a large wad of paper money. 

Prepaid debit cards can also be useful for people who don’t have access to a regular debit card that’s connected to a bank account and people who don’t have credit cards. 

Also, people who want to take control of sticking to a strict budget can find it much easier to do so when they use prepaid cards with a certain amount stored on them instead of using debit cards or credit cards in which it’s easy to overspend and go over budget. 

Furthermore, some employers pay their employees with specific types of prepaid cards, called payroll cards. They are typically used to pay workers who don’t have bank accounts or direct deposit capabilities. 

Some government benefits, such as social security, can also be paid via prepaid cards.

Choosing the Right Prepaid Debit Card

Before you start looking for a prepaid debit card, you need to know what to look for. 

First off, prepaid debit cards come with an array of different fees that will eat into the cash balance on your card, so you should know about the different types of fees associated with prepaid cards and then compare different prepaid cards to find the best option for you. 

Fees can include transaction fees, monthly fees for use, reloading fees, ATM fees, foreign transaction fees, and others. Some issuers even charge for checking the balance on your card.

However, other card issuers have minimal fees. 

So, make sure you shop around. Get started by checking out this list of prepaid debit cards. 

Also, in addition to looking at fees, you should consider the convenience of different prepaid debit cards. 

For example, many of the best cards are free to use at ATMs, but you’ll want to make sure you can use your card at ATMs of a large network rather than finding out you can only use a card at specific ATMs that aren’t close by to your home or work and are therefore difficult for you to access.

Summing Up

So, there you have it. Prepaid debit cards are cards that you load money onto and then use to pay for purchases as you would with a regular debit card or credit card.

Prepaid cards can be useful for various circumstances and purposes. They can be particularly beneficial to people who don’t have bank accounts, can’t qualify for credit cards, or want to stick to a budget. 

Employers can also use the cards to pay workers who don’t have bank accounts. 

If you’re considering getting a prepaid debit card, just make sure that you compare different ones to avoid fees and you get a card that is convenient to use.

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