New to Prepaid Cards? Your Basic Introduction

Through the years, prepaid cards have become widely popular. A Pew survey even indicated that prepaid card use from 2012 to 2014 increased by as much as 50 percent. From the time they were first introduced, prepaid cards have truly come a long way. Nowadays, it has evolved into one of the most preferred payment options available.

What are Prepaid Cards? Here’s All You Need to Know!

If you are reading this, it is likely that you are considering getting a prepaid card. Or maybe you may already have one but don’t know how to use it fully yet. Fortunately, you’ve come to the right place. This article can serve as your short but comprehensive guide to one of the best financial tools you can get your hands on.

What are Prepaid Cards

Prepaid cards look no different than the typical credit and debit cards. However, unlike the two, prepaid cards are not linked to any bank account. They also need to be preloaded with money before they can be used for ATM withdrawals and purchase transactions. 

In addition, unlike prepaid cards, you won’t be “borrowing” money from the bank when you use it. With credit cards, the bank pays for your purchases first and you’ll just pay the bank at a specified date. With a prepaid card, you will be using your own money—the balance that’s available on the card.

Many people mistake prepaid cards for gift cards. While they do have certain similarities, they are actually two separate and distinct financial tools. Unlike prepaid cards, gift cards are designed for one-time use only. In other words, once the balance available on the gift card has been depleted, you won’t be able to load money onto it or use it again.

How to Use Your Prepaid Cards

Just like debit and credit cards, prepaid cards can also be used for online and merchant transactions. And unlike gift cards, prepaid cards can be used to withdraw money. Prepaid cards are typically affiliated with established financial networks. That means, they are also honoured and accepted in establishments associated with the financial network.

Each time your prepaid card is used, the money is deducted directly from the balance that’s available on the card. If the balance is not enough to pay for a specific purchase, the transaction will be declined. Also, if the balance available on the card has been depleted, you have the option to load money onto your card at any time you deem convenient.

The frequency of the loading will also depend on what’s convenient for you. You can load money, weekly, monthly, or quarterly, whichever suits your needs. You even have the option to load money on the card daily if you want to!

What to Consider When Choosing a Prepaid Card

Nowadays, there’s no shortage of prepaid cards you can choose from, that picking the one that’s best for you has become quite challenging. Fortunately, you can narrow down your options by asking yourself a few key questions about your possible use of the card. For instance, it is more convenient to load money through direct deposits or through network reloads?

If you prefer the latter, it would be ideal to pick a prepaid card whose reload network is easy for you to go to. Another important factor you should take into account are the fees and charges. In line with this, examine the transactions you often do using your prepaid card.

Take note of the patterns you’ll notice in terms of card use and identify those transactions you perform more often. Understandably, it would be best to choose a prepaid card that charges less for those transactions you perform often.

How to Find the Best Prepaid Card: Top Tips

Also commonly referred to as general purpose reloadable cards, prepaid cards have truly come a long way. Nowadays, we even have international prepaid cards, an awesome financial tool that can be used when you travel outside the country.

In a way, prepaid cards work similar to prepaid cards or debit cards. However, prepaid cards have one distinct difference—they are not connected to any savings or checking accounts.

Instead, money has to be loaded onto the card before it can be used for purchase transactions or ATM withdrawals.

In 2016, the Consumer Financial Protection Bureau (CFPB) issued consumer protections for prepaid card users. It went into effect last April of 2019. The consumer protections were created to change the prepaid card consumer protections for the past decade.

Prior to the CFPB rule, prepaid card providers were not required to give consumers fee disclosures, protection from unauthorised transactions and loss, and free access to their account information.

Fortunately, many prepaid card providers voluntarily provide some protections already. Robust protection is just one of the amazing benefits prepaid card offers. No wonder they have grown in popularity over the years.

Need proof? In 2016 alone, Americans spent a whopping $557 billion using their prepaid cards! This accounted for 9 percent of all prepaid card purchases made through merchants.

Get Your Hands on the Best Prepaid Card: Key Factors to Consider

If you’re considering getting a prepaid card or an international prepaid card, below are some the fundamental factors you need to take into account:

Is it what you really need?

If you don’t like checking accounts because of the balance requirements or the exorbitant transaction fees, a prepaid card can be your most amazing alternative.

If you also find it hard to stay within the monthly budget you’ve set, you’d find prepaid cards to be of tremendous value.

If you wish, you can have one card for groceries, gas, shopping, etc. Once you’ve depleted the balance for each, you have the option to wait for the month to end before you load money onto the card again.

This can help ensure you stay within the monthly budget and not spend more than you are supposed to or can afford to.

There are also other smart uses for prepaid cards. For instance, many parents have been using it to teach their children how to manage their money accordingly.

Prepaid cards can also be a good gift option instead of a gift card because it offers better loss and liability protections and has a more vast acceptance to boot.

What are the terms, fees, and conditions?

Look into these three primary components as they can differ from one issuer to another. You also need to compare terms laid out as not all prepaid card providers have the same terms and conditions.

If the fees you’ll likely pay is a priority for you, it is crucial to also look into other possible fees and charges you’re likely to incur. For instance:

●    Monthly fees

●    Purchase fees

●    Balance inquiry fees

●    Point of sale transaction fees

●    ATM withdrawal fees

●    Loading fees

●    Dormancy fees

●    Fees when you add or load money onto your card

Is it easy and convenient to use for purchases?

Using prepaid cards for purchase transactions is similar in a way to using a debit card. You can use it for purchase transactions and ATM withdrawals just like you would a credit or debit card.

The primary difference is you will be using your own money and not that of the bank.

Also, depending on the features available, your chosen prepaid card might come with other enticing options like online bill payments and free cash withdrawals at in-network ATMs.

Conclusion

Finding the best prepaid card that will suit your needs is no easy feat. However, as long as you know what your priorities are and what to look for, picking the right prepaid card should be a walk in the park!

Answers to the Most Common Prepaid Card Questions

Simply put, the best prepaid cards are the ideal alternatives to carrying money around. You just load money onto the card and you can use it for purchase transactions and ATM withdrawals instantly.

If you are considering using prepaid cards but don’t know much about it, you’ll find all you need to know about this amazing financial tool in this article.

Prepaid Cards: Answers to Frequently Asked Questions

Are there different kinds of prepaid cards?

Basically, there are two different types of prepaid cards: single-use (non-reloadable) and reusable (reloadable) cards. Rebate cards, incentive cards, promotional cards, and gift cards are some classic examples of non-reloadable cards.

In other words, you only get to use them one time and you won’t be able to use them for other transactions after.

The best prepaid cards on the other hand can be loaded and reloaded with money whenever you deem fit. That means you can also use it for purchase transactions and ATM withdrawals given that there is money available on the card.

How are prepaid cards different from gift cards?

Unlike prepaid cards, gift cards come with a predetermined amount of money loaded onto them. It also cannot be reloaded once the balance on the card has all been used up. Gift cards are also usually designed to be given as gifts.

On the other hand, you can use your prepaid card as many times as you want as long  as there is balance available on the card. Once you deplete all the money on the card, you have the option to load money onto it so you can use it again.

Can prepaid cards help me build credit?

Prepaid cards won’t help you build your credit as you are not borrowing and repaying money. If anything, all you’re doing is accessing the money that you have loaded to the card.

To build credit, you need to borrow money and pay it back. The creditor also has to report your payment record to major credit reporting agencies.

How can I choose a prepaid card that suits my needs best?

Since there are various prepaid cards to choose from nowadays, you need to do some research before diving in. Fortunately, a quick Google search can already give you an idea if the card you are considering suits your needs and your lifestyle.

For instance, if you want a prepaid card you can use to shop online, it makes sense to get a card that will require a per-use purchase fee as opposed to a monthly fee.

However, if you use your prepaid card similar to a debit card, it would be ideal to go for one with a low monthly fee. It would also be a good idea to see if you can qualify for a fee waiver.

How can prepaid cards help me manage my money?

Nowadays, even those individuals who have access to banks are using prepaid cards,  thanks to all the amazing benefits they offer. One thing many people love about prepaid cards is the fact that it is a great and effective budgeting tool.

Some prepaid cardholders use different cards for various purposes. For instance, grocery money for the month is loaded on one prepaid card while the budget for food is loaded on another.

As soon as the balance on the card has been depleted, they will wait until the end of the month until they load money onto the card again.

In a way, prepaid cards can effectively help you manage your spending since your transactions (purchases and ATM withdrawals) will be limited by the balance that’s available on the card.

Once the balance has been depleted, your spending also stops automatically.

Prepaid Cards: Fast Facts You Should Know

Basically, the best prepaid cards work like a combination of a credit card and a checking account. Oftentimes, they are issued by bank holding companies and are branded by established financial institutions.

Before the best prepaid cards can be used, money needs to be loaded on the card first. Just like a credit card, prepaid cards can be used for purchase transactions (online and at merchants) as well as for ATM withdrawals. Also, akin to most credit cards, prepaid cards are honoured where most credit cards are accepted.

While prepaid cards share a few features in common with credit cards in terms of functionality, it’s financial side is more identical to that of a checking account. What that means is any amount spent or withdrawn will be deducted from the total balance available on the card. In addition, prepaid cardholders won’t be able to spend beyond the balance that’s on the card.

Prepaid Card Fast Facts

If you’re considering getting a prepaid card, here are some fast facts you need to know:

  • For some, prepaid cards are the convenient alternatives for various transactions that will require the use of credit cards. That being said, prepaid cards can be especially beneficial for people who don’t have access to banks or have minimal to zero knowledge in terms of how they work.
  • Prepaid cards can also be awesome for people who have no access to banking services or those individuals who are locked out of the banking system because they have poor credit scores.
  • Those who like to give gift cards as tokens would be delighted to know prepaid cards provide a much better alternative thanks to some of the beneficial features they come with. For instance, some prepaid cards come with protection in the event of loss or theft.
  • Most of the time, cash cannot be used to pay for online services or products. Fortunately, prepaid cards can be used to pay for transactions done online. Unlike gift cards, prepaid cards can also be used to withdraw money from the ATM.
  • Thanks to the topnotch benefits they offer, prepaid cards have evolved into one of the fastest growing niches in the financial sector. In fact, many experts project the number of prepaid cards sold to rise by as much as 22 percent annually from 2015 to 2020. Another prediction indicated that the total amount that will be loaded by prepaid cardholders will rise to as much as $116 billion by the year 2020.
  • To be able to pick the best prepaid cards for your needs, consider it best to analyse your spending habits first. From there, opt for a card that will charge less in areas where you are more likely to be charged. For instance, if you use your card for a lot of transactions, it would be wise to choose a prepaid card that will waive fees each time you exceed the money transaction limit.
  • Another beneficial tip you should keep in mind when looking for a prepaid card is structure that you can easily understand. You have to remember that some prepaid card providers use the flat-free model while others charge users for most card transactions. Analyse your monthly card activities so you can gauge if a flat-free model would be a good fit for you.