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 What that means is any amount spent or withdrawn will be deducted from the total balance available on the card.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.