Prepaid debit cards are an excellent alternative to traditional checking accounts and debit cards. The best prepaid cards offer similar features and perks, such as online bill pay, mobile check deposit, and direct deposit, while avoiding overdraft fees or the need for a checking account.
In many ways, prepaid debit cards look and work just like regular credit cards. But looks can be deceiving. The most significant distinction is that the credit limit for a prepaid credit card is almost always limited to the amount of cash that is loaded on the card. Prepaid credit cards also do not impact your credit profile or FICO score. Also, some prepaid cards carry high fees and rarely include a rewards program.
But if you’re willing to shop around, it is possible to find prepaid credit cards with lower fees and generous benefits. The prepaid cards included on this list carry low fees, provide a convenient alternative to debit cards, and some offer rewards programs. One prepaid card even targets small business owners who wish to provide funds to their employees.
If you have an active PayPal account, the PayPal Prepaid Mastercard allows you to access your money without waiting for transfers to your bank. Load up to $300 per day and $2,000 every 30 days instantly from your PayPal account for no charge. Unlike the PayPal Debit card, which requires a Premier or Business account, PayPal Prepaid Mastercards may be attached to personal accounts. PayPal Prepaid Master card also offers a rewards program and a savings account.
American Express® Serve prepaid cardholders enjoy worldwide acceptance along with Purchase Protection and Roadside Assistance and other features unique to American Express® cards. Serve cards are free online, $5 if purchased in a store. There is no minimum balance and no activation fee. The monthly fee for the Serve card is waived if you load at least $500 on the card monthly or if your card has a $0 balance at the end of the billing cycle. Manage your account online or through the mobile app, with 24/7 customer service available.
American Express® has teamed up with the world’s largest retailer to produce the American Express® Bluebird prepaid card. More than a prepaid credit card, Bluebird by American Express® and Wal-Mart is a fully functioning checking account. The card features online bill pay, ATM access, and free direct deposit. Card users can establish a separate account to save for special occasions or items. Family accounts are also available. Online account management makes it easy to keep track of spending.
If you thought H&R Block only did taxes, you’re behind the curve. The H&R Block Prepaid Emerald Mastercard carries no activation fees, no monthly fees, and no ATM fees for withdrawals from Allpoint ATMs. Direct deposit of your paycheck or government-issued check is free, and the Federal Deposit Insurance Corporation protects your funds. One drawback: a $2.50 inactivity fee after three months.
As a leader among prepaid credit cards, GreenDot offers both a prepaid Visa card and a prepaid Mastercard. Get the Green Dot card free by ordering online or purchase a temporary card for immediate use. There are no ATM or activation fees for either the Visa or Mastercard. You can avoid the monthly fee by making 30 transactions each month or loading $1,000 on the card. Reload the card with a GreenDot reload card or at the register at many of your favorite merchants.
The name may not be familiar, but the Kaiku Visa Prepaid card offers spending flexibility with few fees. The Kaiku Visa Prepaid Card provides direct deposit, mobile banking, withdrawals from network ATMs, mobile banking, and customer service free for cardholders. Manage your card account on your iOS or Android mobile phone or tablet through a dedicated app available through the iTunes Store or GooglePlay. However, the Kaiku Prepaid Visa card offers no rewards program or savings account.
The Mango Mastercard includes juicy features such as a mobile app that is compatible with both iOS and Android devices, plus the ability to be loaded directly through your PayPal account. You can avoid the monthly fee by loading at least $500 onto the card. The Mango Mastercard also features a savings account to help you build a nest egg. Virtual cards keep you safe while shopping online.
With a name like Brink’s, you would expect the Brink’s Money Prepaid Mastercard to feature first-class security, and The Brink’s Money Prepaid Mastercard lives up to its name. Features like the option to place your photo on the card, virtual accounts, and transaction text alerts protect you from unauthorized transactions. You can also earn cashback and payback awards. A $10 cushion allows you to avoid embarrassment when you go slightly over your card balance.
The AccountNow Gold Visa Prepaid card includes features associated with credit cards like mobile access and text alerts along with checking account features like bill pay and direct deposit. The AccountNow Gold Visa card carries no activation fee and no minimum balance. As an extra benefit, the AccountNow Gold Visa Prepaid Card provides a $15 bonus when you establish a recurring direct deposit.
The Western Union NetSpend Prepaid Mastercard makes it easy to send and receive Western Union transfers nearly anywhere worldwide. Add cash to the card at Western Union outlets and many of your favorite merchants as well as directly from your bank account. The Western Union NetSpend Prepaid Mastercard also features a free direct deposit for your paycheck or government payment with funds protected by FDIC.
Pros and Cons of Prepaid Credit Cards
Prepaid credit cards never carry overdraft fees or over-the-limit fees. Therefore they provide a great way to impose discipline on out-of-control spending habits. Prepaid cards are also much safer to carry than cash. But if you’re hoping to establish or rebuild your credit profile or FICO score, a prepaid credit card won’t be of much help. With very few exceptions, prepaid credit cards do not report their transactions to any of the three major credit reporting agencies: TransUnion, Equifax, or Experian. As a result, your prepaid card account history is not included in your credit report. A secured credit card is a better choice than a prepaid credit card if you want to correct a limited or damaged credit history.
FAQ on Prepaid Credit Cards
What is a prepaid credit card?
A prepaid credit card is essentially a substitute for cash. It is a card issued by a financial institution that has been secured with a prepayment. These cards can be compared to debit cards that use preloaded funds for transactions instead of money deposited in a traditional checking account.
What is the difference between a prepaid card and a credit card?
A prepaid card is not linked to a bank checking account or a credit union account. Instead, you are spending money you placed in the prepaid card account in advance. This is sometimes called “loading money onto the card.”
When is a prepaid card a good option?
Prepaid cards can be useful if you are looking for an alternative to paying cash but are unable to qualify for a credit card. Although prepaid cards won’t help your credit scores, you can still benefit from the convenience of using a card to make purchases.
Can prepaid credit cards improve your credit score?
If you use a prepaid card, it won’t have any influence on your credit score, good or bad. If you’re looking to rebuild your credit, consider a secured credit card as a better option. It’s similar to a prepaid card in that you have to make a deposit to get the card, but it’s actually a credit card.
Can prepaid credit cards be traced?
Yes, they do keep track of purchases. Almost all prepaid gift cards require some form of registration where they collect different data about you: name, address, zip code, phone number, etc.
Can I use a prepaid card for pre-authorization and security deposits?
In some cases, you may be able to, but you probably don’t want to do it. When you offer a card for a deposit for services such as hotel rooms or car hires, or in-flight purchases, the company will ‘lock’ funds on the card for the duration of the hire, and you won’t be able to use it until the final bill has been settled and cleared.
Audrey Henderson is a Chicagoland-based writer and researcher. She holds advanced degrees in sociology and law from Northwestern University. Her writing specialties are sustainable development in the built environment, policy related to arts and popular culture, socially and ecologically responsible travel, civic tech and personal finance.