However, you can find prepaid cards that have minimal fees, such as Bluebird by American Express , which has no card opening fee when you open an account online and no monthly fee. A debit card is linked to a checking account and provides quick and easy access to your money. You can use a debit card to make new purchases, pay bills and withdraw cash from an ATM, bank or credit union.
When you complete a transaction with a debit card, the money is automatically deducted from your checking account. No matter which debit card you have, you can track how much money you deposit and withdraw each month by looking at your monthly statements. Debit cards might not help your credit, but they can help you create a budget. Prepaid cards and debit cards can both be used to make purchases, but the best choice for you depends on what you want to get out of the card.
Prepaid cards can be a good option if you don't have a checking account. Parents who want to give their kids a limited amount of money can also opt for prepaid cards. Prepaid card companies usually offer several ways to load funds onto a card.
Some cards also let you link to a checking account to make online transfers. Check out our favorite options. Because many prepaid debit cards don't require credit checks, they're easy to get.
If you're in one of the roughly 7 million U. If you try spending more than you have, most prepaid cards simply decline the transaction.
They can be useful for people on a fixed income or teenagers who get allowances. But prepaid debit cards have major limitations compared with banking accounts and credit cards.
Although they typically have online services, many prepaid cards lack standard banking services, such as a way to withdraw or reload cash for free. The money you load on a card probably won't earn interest, either. If you only want to load cash for safekeeping, and don't plan to make many withdrawals, it may be better to find a high-rate savings account for your funds.
Prepaid debit cards — pay before: You load money onto the card via cash, checks, direct deposit or a transfer from another account before paying for transactions. Debit cards — pay now: You use money directly from a checking account when paying for purchases or withdrawing money from an ATM.
Credit cards — pay later: You borrow money from a bank when you use the card and pay the money back later. Prepaid cards vary widely, but they tend to have these features in common:. Reload options: You can usually add money to a card in multiple ways, such as setting up direct deposits, loading cash at participating retailers and depositing checks at ATMs.
Some cards also let you make online transfers or mobile check deposits from a smartphone. Fees: You might have to pay for activating a card, making deposits and using out-of-network ATMs.
Some cards charge a fee for every purchase and ATM transaction. A prepaid debit card is much like a gift card : It allows you to spend whatever amount of money is stored on the card. Once the balance is used up, you can reload the card online or at an ATM, a participating store, or other physical location.
Prepaid debit cards are issued by banks and branded by the major credit card companies, including Visa, MasterCard, Discover, and American Express. A prepaid debit card is as good as cash—and sometimes better:.
Anyone who wants to stick to a strict budget, or who has had trouble managing credit cards, could also consider using a prepaid debit card. You can use a prepaid debit card for any transaction that you might otherwise use a credit card or regular debit card for. In many instances, the recipient of your payment may even be unaware that the card is prepaid. Some employers pay their workers with prepaid debit cards called payroll cards which can be useful if the person doesn't have a bank account or direct deposit.
Many government benefits are also available via prepaid debit cards, including Social Security. With a regular debit card , the amount of money you can spend is tied to how much you have in the checking account it is linked to.
So you need to have a bank account to use a regular debit card, while you don't with a prepaid debit card. With a regular debit card, the amount of money you have available to you will also fluctuate from day to day, as money moves in and out of your checking account.
With a prepaid debit card, you have a fixed amount of money to spend, which declines as you spend it and rises only if you reload the card. Prepaid debit cards can come with an assortment of fees that will eat into your cash balance. These may include monthly fees, transaction fees, ATM fees, reloading fees, foreign transaction fees, and more.
You may even be charged a fee for checking your balance in the card. Employees have a legal right to decline being paid through a payroll card because the fees will reduce their take-home pay. If you're shopping for a prepaid debt card , pay particular attention to its fees. In the years that followed, these prepaid cards saw more and more currencies added to them. Circa , UK challenger banking services such as Monzo, Revolut, and Monese founded themselves on the basis of prepaid card offerings, following in the footsteps of Cashplus.
A consumer might not want to set up a bank account if they lack a credit history, for example. But there are other reasons why this payment method is popular. Which means these cards act as an effective budget tool for those worried about spending more than they can afford. Prepaid cards are also safer than cash, which is why travelers like using them abroad. Traditionally, prepaid cards have been used by brands to boost customer loyalty.
Today, gift cards — virtual or physical — are still a popular present. And for those buying for themselves, prepaid cards can rack up on-going loyalty rewards which later convert to cash. Prepaid cards have also proven handy in emergency situations.
Most recently, various governments have deployed prepaid cards via third-party vendors as a way to disburse COVID funds.
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