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How to shop for Prepaid Debit Cards

Prepaid cards have come a long way since they were first introduced in the late 1990s. Now they’re not just an option for people without bank accounts — they’re also a helpful tool for parents, budgeters, college students, and more.
Their growing popularity has made prepaid cards one of the fastest-growing payment methods in the country. Industry analysts expect the market to grow to $897 billion by 2023, a big increase from its 2019 level of $561 billion.
Are you thinking about getting a prepaid card? Read on to learn more about what prepaid cards are, how they work, when to use them, and their pros and cons. Plus, we’ll show you how to find the best prepaid card for your needs.

Open-loop vs. closed-loop prepaid cards and the focus of this guide

There are two types of prepaid cards: open- and closed-loop cards.
Both open-loop and closed-loop prepaid cards are cards that you pre-load with funds to spend at retail locations. However, their use cases differ.
Closed-loop cards, like gift cards and transit cards, can only be used with specific merchants or in closed systems.
Open-loop cards, on the other hand, are more flexible. You can make purchases with an open-loop prepaid card at the point-of-sale terminals of most retail locations. You can even use them to withdraw cash from ATMs. This makes open-loop cards the more popular choice.
One of the most common types of open-loop prepaid cards is the general-purpose reloadable (GPR) card. Other open-loop examples include payroll cards, government benefit cards, and cards to disburse loans or insurance proceeds.
GPR cards are the prominent prepaid product on the market right now. Unless otherwise noted, when this article refers to prepaid cards, it has GPR cards in view. Even more specifically, it has in view GPR cards that bear the logo of one of the major credit card networks, such as Visa and MasterCard.

What is a prepaid card?

A prepaid card is a payment card that looks like a credit card but links to a prepaid account. There is no credit involved. Cardholders can transfer money into the account and then use the prepaid card to make purchases, withdraw money from ATMs, and submit payments.
Like debit cards, prepaid cards let users tap into their savings to make purchases. But unlike debit cards, prepaid cards do not link to a bank account. This makes them a convenient option for people who don’t qualify for a bank account.

How do prepaid credit cards work?

First, purchase the prepaid card. You can buy the card at a retail store, directly from your financial institution, over the phone, or online. Typically, you’ll pay an upfront purchase fee to activate the card, plus the amount you want to load onto your new card. Depending on your vendor, the card may become active immediately, or you may have to take additional steps, such as activating it over the phone.
To use all of a card’s features, such as ATM withdrawals and reloading, you’ll need to register it. To do so, you’ll typically have to provide your full name, address, date of birth, and social security number. If you don’t successfully register the card, you will only be able to use it until the initial balance is depleted.
After registration, you will usually receive a card with your name embossed on it. At this point, you can reload your card in a variety of ways. To get money on your prepaid card, you can:
  • Link to a bank account.
  • Deposit cash in person at a participating retailer.
  • Set up direct deposit from an employer.
  • Buy a reload pack.
  • Deposit a check at an ATM.
As long as your account is funded, you can use the prepaid card to make purchases anywhere the card is accepted. The amount you spend on each transaction will be deducted from your total available balance. If you try to make a purchase when you don’t have enough money, it will be denied.
You can continue to load, use, and reload the prepaid card until it expires.

Who should consider getting a prepaid card?

The use of prepaid cards is on the rise due to the security, control, and convenience that they offer. Here are some common use cases:

People without bank accounts or credit cards

Prepaid cards provide a great alternative for people who can’t qualify for credit cards and bank accounts.
When you apply for a checking account, banks and credit unions often check your banking history. Likewise, when you apply for a credit card, you’ll undergo a credit check. If you have an inconsistent or unreliable banking or credit history, your application may be denied.
Prepaid card accounts present little risk to issuers since prepaid card users draw from their own funds rather than spending bank-issued credit. So most prepaid cards require little or no screening. This makes them a great option for people who can’t get approved for traditional credit or bank accounts. That explains why, according to a Consumer Financial Protection Bureau report, 41% of prepaid card users didn’t have a checking account, and 33% had never used a credit card. (These figures may include open-loop cards that do not bear major-issuer logos.)
Even some people who qualify for bank accounts and credit cards may not want them for some reason. Or they might prefer not to use them for certain things. With a prepaid card, such people get all the convenience and security of a credit card, so they don’t have to carry around a ton of cash.


Prepaid cards are also a good option for parents who want to teach their kids how to use a credit or debit card. According to an Auriemma Consulting Group survey, 50% of U.S. parents have used prepaid cards. Whether you’re looking to give your child secure access to money while you are out of town, or you just want a convenient way to dole out allowance, prepaid cards are a great solution.


Prepaid cards can also be helpful as a tool for budget management. Many people use them to control their spending and to help save money. For example, if you’re going on vacation and you want to stay on budget, you can load money onto a prepaid card to ensure that you don’t overspend. Or if you want to keep your grocery bill under a certain cost, load up your prepaid card with your allotted grocery budget. Plus, if you need help saving money for an upcoming purchase, you can load it onto a prepaid card.
In short, a prepaid card is a great way to harness the convenience of a credit card without the risk of spending beyond your means.

People who used to worry that prepaid cards had too few protections

In the past, prepaid cards suffered from one major drawback: they lacked the protections offered by debit cards. But times have changed. Since April 2019, the Consumer Financial Protection Bureau (CFPB) has imposed comprehensive regulations on prepaid card issuers. These regulations extend debit-card protections to prepaid cards. These include:
  • Access to account information: A complete, accurate, and timely view of all account activity.
  • Limited liability and error resolution, including provisional credit: Protection of funds if there are billing errors or your card is lost or stolen.
  • Pre-acquisition disclosures: Issuers must provide short- and long-form disclosures, making it easier for people to understand fees and comparison shop.
  • Submission and posting of prepaid account agreements: Issuers must submit their user agreements to the bureau and make them available to the public.
  • Overdraft credit feature regulation: Card issuers must structure overdraft credit features as a separate or sub-credit account. The cards are referred to as hybrid prepaid credit cards.
These new protections ensure that prepaid card issuers are open and honest about their operations.
Here is a list of the benefits and the drawbacks to consider.
  • Safer than carrying cash.
  • No bank account required.
  • Secure payment method.
  • New protections increase transparency.
  • No overdrafts.
  • Can help with budgeting.
  • Provides ATM access.
  • Purchase and fraud protection in most cases.
  • Online bill pay.
  • Worldwide functionality for Visa, MasterCard, Discover, and American Express branded cards.
  • Merchants in 200+ countries accept Visa and MasterCard brands.
  • No credit card bill to worry about.
  • No risk of going into debt.
  • No credit check.
  • Guaranteed approval in most cases.
  • Enables online payments and purchases.
  • Credit card alternative.
  • No interest.
  • Many options to choose from.
  • Growing features and capabilities.
  • Rewards are available with some cards.
  • May have extra features and benefits.
  • Can reload and use on a long-term basis.
  • No advances or credit available. All money must be deposited in advance.
  • Often stricter notification requirements than credit or debit cards if the card is lost.
  • Fees often apply (monthly, reload, signature purchase transaction, PIN purchase transaction, activation, etc.).
  • Doesn’t help you build credit.
  • May not be accepted by car rental businesses or other merchants that require a large deposit.
  • Maximum balance limits apply.
  • May lack sophisticated online account management.
  • No interest earned.
  • Certain issuers charge for customer service.
  • Registration is required for reloading.
Does a prepaid card sound like the right fit for you? Before you buy one, learn how to find the best card for you.

Where to get a prepaid credit card

You can buy prepaid credit cards online, at retail locations like drug stores and grocery stores, over the phone, and at some financial institutions. These cards are issued by payment networks (like Visa, MasterCard, and Discover), and each comes with its own brand, fees, limits, and conditions.
Comparing a variety of options side by side will help you to find the best deal for your needs.

How to compare prepaid credit cards

What should you consider when comparing prepaid credit cards?


Find out where you can use your prepaid card and how you can withdraw cash. Common options include:
  • Obtaining cash via bank teller transactions.
  • Using a personal identification number (PIN) to get cash back from merchants during POS (point-of-service) transactions.
  • Making purchases at vendors that accept the card’s payment network.
  • Making withdrawals at ATMs.
Ensure that you’ll be able to use the card in ways that work for you.

Reload options

Check the available options for reloading the prepaid card. Ensure that they match your needs so that it will be easy and convenient to keep the card funded. For example, if you prefer to load your card with a direct deposit from your employer, make sure that the card issuer allows this option.
Additionally, find out if there is a fee to reload. Reload fees can quickly add up.

ATM network

Find out about the card’s ATM network — the ATMs that you can use at no cost. Some cards have expansive ATM networks that span the entire U.S. Others are more limited.


Read the fine print to find out about every fee associated with the card. How does the issuer’s fee schedule compare to competitors’? Look at all of the fees the issuer charges, as well as the cost of each fee. Common fees include:
  • Monthly service fee.
  • Activation fee.
  • Card reload fee.
  • Signature purchase transaction fee.
  • PIN purchase transaction fee.
  • In-network and out-of-network ATM withdrawal fees.
  • Customer service fee.
  • Balance inquiry fee.
  • Inactivity fee.
  • Paper statement fee.
  • Transfer fee.
  • Bill payment fee.
  • Additional card fee.
  • Foreign transaction fee.
  • Cancellation fee.
Prepaid card providers must disclose their fees before you buy their card.
Consider this. A study of 66 major prepaid cards found that cardholders paid an average of $10 to $30 each month. This cost depended on the cardholder’s understanding of the card’s fee structure. Those who understood their card’s fees were better equipped to minimize these costs.
Be sure to review and compare the fees of at least three cards before making a decision. Look for one that suits your budget.

Payment network brand

Choose a payment network brand that will be accepted where you plan to use it. Popular payment networks include Visa, MasterCard, American Express, and Discover.

Which is better, Visa or MasterCard?

Visa and MasterCard are both accepted widely, in 200+ countries. In most cases, if one is accepted, so is the other. However, Visa does come in first in total purchase transactions worldwide. According to Nilson Report, Visa’s 2020 purchase volume was $4.170 trillion (70.5% of the Visa-MasterCard market), significantly higher than MasterCard’s $1.745 trillion (29.5% of the Visa-MasterCard market).

Customer service

What is the card issuer’s customer service like? Do you have to pay to get help? Are they available through multiple channels such as online chat, email, and phone? Are past customers happy with the service they received?
When you need help, it’s important to have a team that is pleasant and efficient. Check the customer service hours and channels, as well as reviews from past customers.

Maximum balance limits

The maximum balance limit caps how much you can load onto the card, and it typically ranges from $2,500 to $25,000. Pay attention to this limit if you need to load large amounts onto the card.

User reviews

You can learn a lot by reading what past users of prepaid cards have to say. Read our user reviews to learn about the user experience, benefits, and drawbacks from unbiased sources.


If your card gets lost or stolen or the card issuer goes bankrupt, you need to be able to get your money back. Though the situation has improved since 2019, prepaid card issuers may not all offer the same liability and fraud protections. Compare cards to see which ones offer bonus protections not mandated by law. Does a card offer purchase protection? Does it offer federal deposit insurance? Such protections are a big plus.

Rewards and features

Does the card offer any bonus features like online bill pay, cash back rewards, or check writing? Look for extra perks to get the most out of your card. For example, the right prepaid card may offer you the ability to transfer money to friends and family on your phone, 24/7 mobile account management, or a savings account option.
Look especially for rewards that will help you earn money back when you use your card. For example, a card may offer you points, cash back, or miles when you spend at restaurants, gas stations, or retail stores. By matching a rewards package to your usage habits, you can get the most out of your card.
Consider rewards and features carefully when shopping for a prepaid card. Look for the card that offers you the most value at the lowest cost.

Frequently asked questions about prepaid cards

Do hotels accept prepaid credit cards?

Yes, hotels often accept prepaid cards. However, your balance will need to be high enough to cover the cost of the room, taxes, and incidentals.
What are incidentals? Hotels often put a hold on an amount of money to account for incidentals like food, drinks, laundry, and room service. The amount that they hold varies from one hotel to the next. To ensure that your balance is large enough to cover this hold, ask the hotel how much they’ll put on hold. Plus, find out how long they’ll keep it on hold so you can account for the reduction in your balance.

Can I load a prepaid card with a credit card?

In most cases, you will not be able to load a prepaid card with a credit card. This option was removed by many prepaid card providers because people were using the feature to earn credit card rewards without making actual purchases.

Can you get cash back on a prepaid credit card?

While not a common feature, cash back is slowly making its way into the prepaid card industry. American Express paved the way with its Serve prepaid card, which offers 1% cash back on all purchases.

Do prepaid credit cards build credit?

Prepaid cards do not help you build credit because they do not use credit. All transactions are prepaid.
Technically, then, you shouldn’t call these cards prepaid credit cards. You should call them prepaid debit cards. Or just prepaid cards. As it happens, though, people most frequently call them prepaid credit cards.

How much does a prepaid credit card cost?

The cost of a prepaid card depends on its fees. Monthly service fees range from $0 to $10, reload fees from $0 to $6, activation fees from $0 to $10, and purchase transaction fees from $0 to $2. You’ll have to shop around to find the best deal.

Can a prepaid card be used as a credit card?

Like credit cards, you can use prepaid cards to make purchases at any place the card’s payment network is accepted. But unlike credit cards, purchases made with a prepaid card draw money from a pre-funded balance, not a line of credit.

Can I use a prepaid credit card on Amazon?

Amazon does allow you to use prepaid cards. However, they can’t be combined with credit cards on a single order. And problems may arise if your card issuer requires you to enter the CVV code to make a transaction since Amazon doesn’t support that.

Can prepaid credit cards be used online?

Prepaid cards can be used online with most merchants that accept the card’s payment network.

Which prepaid card is best for you?

The best prepaid cards for you depends on your needs.
For example, if you want to maintain a balance of $10,000, you should look for cards with a maximum balance limit at or above that amount. Or if you’ll be making many PIN transactions, you’ll want a card without a PIN transaction fee.
Use this guide to figure out what you want in a card. Then, find the card that best serves your needs. We make it easy with side-by-side comparisons, filters, and real-user reviews. Review the prepaid cards below to get started.

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