Prepaid cards are used to store funds that are not linked to a bank account. They are usually issued by retailers, credit card companies, or banks. A prepaid card is a physical plastic card that can be used for transactions like cash withdrawals, online purchases, and ATM withdrawals. The money on this card is pre-loaded by the holder and consumers can use them like any other credit or debit card. This card can also be attached to an existing bank account so consumers can access their funds straight away.
A prepaid credit card is a card that’s preloaded with your own money. It’s among the three standard electronic cards, i.e., debit and credit cards. Prepaid credit cards enable one to set a specific spending limit since they must provide capital, not financial institutions or card providers.
A prepaid card works less like a debit card compared to a credit card. Whenever you receive a prepaid card, you’ll load it some amount of cash. The amount you spend on your card is deducted from it in each transaction.
But, unlike a debit card, a prepaid card doesn’t need a bank account. So, this gives you a greater level of privacy. It also helps improve your spending when you find that you’re over-indebted because you’ll only spend within your means.
If you’re not sure if you should buy a prepaid card for yourself or your business, the following points might help you decide:
1. If your spending is projected to exceed $2,000 per month then it’s probably better for you to get a prepaid Visa or MasterCard. The best option would be a prepaid card because you will have no issues concerning fund availability and can just withdraw cash from an ATM if you need extra money.
2. It’s more secure than credit cards because the account number is unique and not tied to anything. If someone has your card number, they can’t spend money on your account.
3. The fees are typically lower than debit cards. For example, using a Mastercard or Visa debit card will cost $1 or 2% of each purchase respectively. With prepaid cards, the fee is only $0.25 per transaction plus $2 for ATM withdrawals at other banks.
8 Interesting Things To Know About The Prepaid Cards
Prepaid cards come in many different types and variations that may make them a great or terrible financial choice. Before you decide on that, here are the crucial things you should know:
1. Prepaid Cards Look More Like Debit Than Credit Cards
These cards might look like your credit card, and you might think their spending is similar. But, note that prepaid cards have no credit behind them. Technically they work like debit cards. When you use them, the money you’re spending is yours, not the banks’.
However, unlike debit cards, you don’t need a bank account to use a prepaid card. You take the card, load money, and use the balance for purchase. If the money runs low or is finished, you reload.
Also, the fees merchants pay to debit cards or prepaid cards are lower than credit cards. There are places where they’ll accept prepaid cards, not credit cards.
Just like debit cards, prepaid cards are widespread, and you can use them anywhere. Thanks to their significant association with significant card networks like MasterCard, visa, discover, and American Express.
2. Prepaid Cards Are Not All Similar
These cards are not similar and when choosing it, look for a card that will suit your specific needs. For example, some cards will enable you to pay bills online or even support automatic monthly payments. At the same time, others issue payment via electronic check provided by the card company or allow you to withdraw money from ATM through a unique pin.
If you plan to use your card for more extended periods, consider getting one that will not charge you to reload. Check with your card issuer if they offer purchase protection coverage and capture foreign transactions plus ATM.
3. No Credit Or Built Is Needed
Initially, they designed prepaid cards for people with poor credit or lack of credit history, and it remains the best option for people with credit issues. With these cards, it’s impossible to spend beyond your means because it will not work when the money runs out. This makes it suitable for teens and people who are recovering from debt.
These cards will not need a credit check, nor will they help you build one because credit bureaus can’t track spending on prepaid cards.
4. Prepaid Credit Cards Are The Other Option For Banks
These cards offer the ease of card-based purchase for more than seven million households in the US who lack checking accounts without the hassles of dealing with banks.
The widespread prepaid cards are undeniable, as our research shows that more than 9% of American households use at least one prepaid card. Thanks to their versatility. Nowadays, you can use your prepaid card to book a room, hotel, or rent a car since they’ve routing numbers plus an account.
5. Prepaid Cards Will Help You Manage Your Money
These cards can be effective budgeting tools even for people with regular bank accounts. Load the money for your monthly spending, and when they are gone, the spending stops instantly.
6. Shop Around For A Prepaid Card
Over the years, the prepaid industries have grown, and the consumers have several options to choose from. They come with different benefits aimed at a particular lifestyle. So choose the one that fits your needs.
7. Be Keen And Watch Out For Fees
Unlike credit cards, you don’t pay interest on prepaid cards, though you’ll find fees that are hidden often. No regulation forces pre-purchase disclosure of payments on prepaid cards as it’s the norm for credit cards, which by law must disclose the terms and conditions first.
According to the Consumer Financial Protection Bureau, standard fees associated with these cards include transactions fees, monthly fees, fees for paying bills, and inactivity fees, among others.
Some prepaid cards charge fees for everything from setup to reloading. At the same time, other issuers charge for unique benefits like automated bill pay, overseas use, or out-of-network ATM withdrawals. It’s essential to take your time and read the disclosure first before signing up for one.
8. You Are Protected
The card issuers offer the zero liability protections of the payment network stated on the card, such as visa or MasterCard. But, if you report theft or loss of your card to the user, many will restore the original balance and give you a new card.
Options Of Reloading Your Prepaid Card
There are several options you can use to reload your card, such as;
1. Transfer money from your bank account or financial institution
2. Depositing your paycheck directly to your card
3. Transfer of funds from your PayPal account
4. Add money at a retail store like Walmart or Walgreen’s
5. Reload your card by purchasing money Pak
6. Reload your prepaid card at the ATM
7. Recharge your prepaid card with a credit or debit card.
8. Use the funds from your personal checking account to reload the card.
9. Use the cash from an ATM or at a nearby store that accepts Visa cards as payment for the transaction.
10. The most efficient way is to use an online bank transfer since you can complete the transaction in seconds and avoid paying fees.
How To Add Money To Your Prepaid Card From PayPal
Knowing how to reload a prepaid card is important for anyone who wants to be able to withdraw cash from it. You can use your debit card or gift card as an alternative if you don’t want to use the prepaid card.
To add money to your prepaid card, go through the following steps:
1) Open up your Paypal account and find the option that says “Add Money To Your Prepaid Card.”
2) If you don’t have an account with PayPal, go to their website and create one.
3) Enter the amount of money to add.
4) Enter your email address and choose a password for your prepaid card. This will take you through another step where you are asked for more personal information – this is necessary in order to make sure that you are not a scammer.
Magalie D. is a Diploma holder in Public Administration & Management from McGill University of Canada. She shares management tips here in MGTBlog when she has nothing to do and gets some free time after working in a multinational company at Toronto.