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Prepaid Debit Card Overview Comparison #credit #advisors


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Introduction to Prepaid Cards

Prepaid Debit Cards (also called Stored Value Cards) provide a new entry point into the financial transaction system.  Whether you are interested in making an in-store purchase, renting a car, making a bill payment, purchasing over the internet or simply keeping your money safe, prepaid cards can help.   Prepaid cards function as payroll cards, remittance cards, store gift-cards or reloadable cards.  This page concerns general purpose VISA/MasterCard reloadable cards.

Prepaid cards are quickly becoming the entry-level financial product for consumers who cannot obtain or do not want a traditional checking account. They offer safety, security, convenience, and transparency (for more, see “A Tool for Getting by or Getting Ahead? Consumers’ Views on Prepaid Cards ” from CFSI).

Below is a summary of some key features of Prepaid Cards:

  1. Network branded prepaid cards (cards that have the Visa or MasterCard logo) are accepted weherever Visa or MasterCard is accepted. The cards are not distinguishable from other credit and debit cards, so they avoid any stigma.
  2. Prepaid cards allow you to make in store purchases, pay bills through bill payment or by guaranteed checks, without carrying large amounts of cash.  If you need cash, ATMs are accessible with your prepaid card.
  3. You will not be turned down when you apply for a prepaid card.  Prepaid cards are easy to open: no credit check, no Chexsystems.
  4. Prepaid cards are safer than cash.  Deposits on the card are FDIC Insured.  Your liability for unauthorized use on the card is limited.
  5. Funds loaded on prepaid cards are available immediately. Funds can be loaded by cash, online transfer or direct deposit. (The cards can also be loaded with checks by “cashing” the check at a licensed check casher or bank and then loading the amount onto the card.)
  6. Prepaid cards are less expensive than cashing checks and purchasing money orders, and can be cheaper than checking account fees.
  7. Prepaid cards help you limit spending and stay on budget.  Most provide a built-in discipline: they cannot be overdrawn.  (But be aware that not all cards have this protection.)
  8. Monitoring card usage and balances is simplified by account updates available on demand by phone, by text, by email, and online.
  9. Multiple issue cards are useful for remittance to friends and family nationally or overseas.

Prepaid cards also have some disadvantages compared to other financial products:

    Your credit score will generally not be improved by your use of a prepaid card. Any savings you leave on the card generally do not earn interest. Some cards have very high fee structures.

Like all financial products, there are better and worse ways to use prepaid cards.  For example, fees can be high if consumers withdraw money frequently from out-of-network ATMs.  Some consumers have found creative ways to get the most from their cards, such as by using them to pay fixed bills and manage variable spending, or even using them to provide their children’s allowances.

Comparison of Popular Prepaid Cards

AssetPlatform.org has partnered with Community Financial Resources (a non-profit organization) to offer a prepaid card through the platform.  The CFR card was designed for the low-wage market; it is consumer friendly and has reasonable fees and useful money-management features.

However, there is no one “best” prepaid card.  Depending on your needs and how you will use your card, one or another might be the best choice for you.  The chart below offers a brief overview and comparison of the most common prepaid cards on the market to help you identify the pros and cons of different options.  Please note: This chart is only a guide; the prepaid market is growing and changing rapidly, and individual card details change frequently as well.  Be sure to check for updated card features and fees before purchasing.

Comparison of Popular Prepaid Debit Cards

Depending on how you use a prepaid card, here are some concerns to watch for:

    Activation Fees range from $0 to $19.95. These can be avoided by setting up direct deposit to the prepaid card, or meeting the monthly deposit minimum. Monthly Fees range from $0.00 to $9.95 per month.  Like activation fees, these are sometimes waived. Loading cash to a card may add a $1.00-$4.95 fee.  Finding a card that has load sites you can conveniently access will save you money. This fee is waived for direct deposit or online transfers.  Domestic ATM Fees range from $0.95 – $2.00 per withdrawal. Other bank surcharges may apply if you are using outside ATM networks.  Finding a card that has surcharge free ATMs in your area can save you money.  When you use a prepaid card for international transfers, watch for international ATM withdrawal and currency conversion fees. Unlike other types of accounts, prepaid cards may have significant inactivity fees. Cards all have maximum load amounts, ranging from $950 – $10,000.  Cards are beginning to be issued with advanced features small dollar loans and savings buckets. 

Note: Another option is the Direct Express® Debit MasterCard®, which is designed for direct deposit of Social Security and Supplemental Security Income (SSI) payments. Cardholders can make purchases, pay bills, and get cash at thousands of locations nationwide. Sign-up is free and no bank account is required. However, the card is not reloadable outside of federal benefits. For more information, go to www.usdirectexpress.com.

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