According to statistics, there are more than 40 million people without bank accounts. This situation is due to several reasons. Some, for example, cannot open bank accounts due to poor credit ratings. Others do not have the necessary documentation required to open an account. There are other people who, for different reasons, have been enlisted in the Chexsystems. Therefore, many banks that rely on these systems for potential customers cannot allow them to open accounts.
These factors and many others, leave millions of people unbanked. They have to struggle and pay a lot of money to cash their checks every time they receive checks. The only option for them is turning to check cashing stores that charge high fees. These stores also have many disadvantages. In terms of security, for example; cashing your check and walking with your cash in the streets isn’t safe. Again, you may end up spending your money for unbudgeted functions.
Some people own bank accounts but for various reasons don’t want to use them. They want to turn to other methods of banking for their financial solutions. Those who find themselves in this situation, prepaid credit cards are a good solution for their problems.
These are secure, convenient, and sometimes fees-free cards. With this card, you don’t have to walk around with your paper cash to settle your bills. You can also quickly cash your checks without having to step into the cashing stores.
How Do Prepaid Credit Cards Work?
Prepaid credit cards work more like debit cards. You load your own money to the Card. Every time you make a purchase, the bill is paid from your Card. You can also add money to them if the balances run too low. However, this depends on the type of Card, as some do not allow reloading.
Some people confuse credit cards and prepaid credit cards. There is a huge difference between the two. With a prepaid credit card, you are spending your own money. You can only use the money you have loaded, and when it depletes, you cannot make more purchases. A credit card on the other hand is a loan given to you and that you have to pay back with interest.
To get a credit card approval, you must be creditworthy. However, with the prepaid credit card, you don’t have to be creditworthy. Your credit rating doesn’t matter.
You can reload your prepaid cards through several ways such as:
Direct check deposits. Most prepaid cards provide this feature. It allows all your checks either for payment or government benefits to be directly deposited onto your card account. It takes away the problem of going to queue waiting to cash your check.
Most prepaid cards also allow free transfer of funds from one card to another. Through this, it is easy to send money between your friends and family members. College students, for instance, use these cards to receive funds from their guardians.
You can also reload your prepaid credit card through the many available cash networks. These include; Money Gram, Green Dot, Visa Money Link, and Western Union.
Types of Prepaid Credit Cards
Prepaid Credit cards fall into two major categories;
Closed-loop prepaid credit Cards-These are cards that you can only use at designated places. It could be a specific merchant or a group of stores as instructed by the issuer.
Open-loop prepaid Credit Cards- You can use these types of cards anywhere as long as the issuing brand is accepted. They contain the issuing brand logos such as American Express, MasterCard, Discover, or Visa. They are the commonly used type of prepaid credit cards.
How to Choose the Right Prepaid Credit Card?
When you decide to purchase a prepaid credit card, there are steps that you should follow. These will help you to buy the best Card that fits your financial needs. These steps are;
- Read the requirements for several cards. These should include the card limits, fees charged for different services, the type of Card, interest rates, and the hidden charges.
- Compare these requirements against your needs. You should be extra careful to avoid unnecessary charges.
- Consider where to use the cards. For example, some cards are used only within the USA. Some also charge foreign transactions when using the card outside the USA. If you are a traveler, make sure to choose a card that will not burden you with extra fees.
- Federal Deposit Insurance Corporation covers some charges applied to some prepaid cards. However, the coverage doesn’t include all the cards. Research on the cards included before deciding on which Card to purchase.
- In case you don’t understand some terms in the agreement, you can reach out to the issuers. Several cards have additional information on their websites that can help you to make an informed decision.
- Ask whether there are additional requirements to enjoy the full benefits of the Card. Some cards require online registration after purchase to fully cover the consumer.
Best Prepaid Credit Cards
The following are some of the best prepaid credit cards based on different criteria;
1. Pink ACE Flare™ Account by MetaBank®
This Card is best suited for people who do not want huge returns on their account balances. People with low account balances will benefit from the high-interest rates offered.
Features and Benefits
Pink ACE Flare™ Account by MetaBank®prepaid credit card is accepted anyplace that Visa cards are allowed. The Card offers an optional savings account. If your deposit account has a balance of $500 or more, you will be entitled to monthly fee reduction from $9.95 to $5.
If you set up a direct deposit, you will be awarded 0.01% APY as a bonus on your checking account. The savings account pays interest at the rate of 6% APY for bank balance below $2,000. The balances above these limits are 0.50%.
Direct Deposit. You don’t have to worry about adding money to your account. With this card, you can set up direct check deposits to your account. You can also link your credit card with your checking account. This will enable you to send money directly to your Card. This Card does not have a minimum balance requirement. Therefore, you can have whatever limit you want.
Using Pink ACE Flare™ Account by MetaBank® mobile app, you can monitor and carry out transactions. You can receive text notifications of all the transactions on your mobile devices, sent money, check account balances, and deposit checks.
2. PayPal Prepaid MasterCard®
This is one of the widely used prepaid credit cards. Due to the low monthly fees charged, among other benefits, it has established itself globally.
The Card currently has approximately 200 plus subscribers worldwide. This makes it an excellent choice for online shoppers.
Features and Benefits
The PayPal Prepaid MasterCard® monthly fees are $4.95 for unlimited purchases. This fee is too low compared to the other cards available in the market.
The Card also provides free direct deposits. You can send funds to your friends and family members without paying anything. It also allows transfer of funds from PayPal account for free. You can, therefore, reload your Card instantly with money from your PayPal account.
The Card does not charge any activation fees. Once you receive your card loaded with money, you can start using it right away.
Foreign transactions, The Card charges 2.5% for foreign transaction fees. This fee is considerably low when you compare it with the other available charges available.
3. Mileage Plus® GO Visa® Prepaid Card
Mileage Plus® GO Visa® Prepaid Card is a unique card offering travel rewards in a prepaid card. This is an excellent option for you if you are a traveler and want to build up miles to travel for less. The Card offers two major plans you can subscribe to;
- The annual plan is $85 per year this plan; you earn one mile for every dollar you spent on qualifying purchases.
- Monthly plan at $5.95 per month this subscription plan, you earn one mile for every two dollars you spent.
Feature and Benefits
Like most of the other prepaid cards, Mileage Plus® GO Visa® Prepaid Card has a mobile app that allows easy account management. The Card does not also require your credit check for approval.
It has a 5% APY a great feature for saving enthusiasts. Also, in all the in-network ATMs, Mileage Plus® GO Visa® Prepaid Card doesn’t charge for withdrawals.
This Card also offers a virtual temporary numbers generator tool. This helps to conceal your identity online from the internet fraudsters. The numbers generated are the ones used for online transactions hence keeping your card number private.
4. Walmart MoneyCard® Visa® or MasterCard® with Cash-Back Rewards
These two cards are almost identical and are both offered by Wal-Mart. They are considered ideal for Wal-Mart’s frequent shoppers. They are also suitable for people looking for cashback rewards.
Features and Benefits
When you use this Card, you are entitled to a particular percentage cashback, depending on your use. For example, if you shop at Walmart.com, you receive 3% cashback, 2% at Walmart Fuel Stations, and Murphy USA. In a year, you may receive up to $75 as cashback rewards.
You can also receive cash backs at different retail stores after making purchases. Just as the other prepaid cards, you are not required to undergo a credit check to receive this Card. You also don’t need to have a bank account linked to your account.
There are also no overdraft charges involved with this Card. Sending funds to other participating cards is free of charge. These include MoneyCard and those issued by Green Dot Bank. This Card also allows a free direct check deposit. You will be able to receive your cash up to two days early.
5. Capital One® Secured MasterCard®
Even though many Prepaid Credit cards do not affect your credit, this card is designed for this function. It helps those looking to rebuild their credit. A secured prepaid card is issued after an applicant has paid a certain amount as collateral. The amount paid is always higher than the set credit limit. Capital One® Secured MasterCard® is, therefore, such type of a prepaid card.
Features and Benefits
The Card sends your payment reports to the three major credit agencies. Also, it grants you access to your credit and avails features that can help you to track your progress. The Card does not charge any monthly or annual fee to have an account. It requires a lower deposit compared to other secured cards, and this makes it popular.
Also, it allows subscribers to pay their deposits in small installments. Capital One offers advanced security features to keep the cardholders safe. In case of suspicious activity on your Card, the issuer sends a notification to notify you of the activities. Also, in the event your card is stolen, Capital One can lock your account.
The major benefits are:
- There are no annual or foreign transaction charges applied.
- The Card allows you to pay the security deposit to in installments.
- In some instances, the credit limit can be higher than the security deposit required.
The major drawbacks are:
- The applicant is required to have a bank account.
- When beginning, the credit limit is relatively lower than the deposit requires.
- The Card does not have any bonus or rewards plans for consumers.
6. Netspend® All-Access ® Account by MetaBank®
The Card does not have a minimum balance requirement to open an account. Netspend is a worldwide payments company and the MetaBank service provider. The Card offers a free large base of MoneyPass ATMs to the consumers.
Features and Benefits
The Card allows early direct deposit. You will be able to receive your paychecks and government benefits by two days earlier. When you use your Card on qualifying purchases, you’ll be able to earn cashback rewards. Overdraft protection feature- you can turn on this feature. Instead of canceling your transactions, your purchases would continue even without enough cash in your Card. A service fee of $20 will be payable if your overdraft is more than $10. The Card also provides an optional savings account. In case you want to make savings, a 6% APY is paid on the first $2,000, and for the amount above this limit, at 0.50% rate. The Card has a temporary virtual numbers generator tool. Instead of revealing your true identity online, you use these temporary ids to make purchases.
This Card, however, has some drawbacks:
- For your account to be maintained, you have to pay $5 every month. Unlike the other cards, this fee cannot be waived.
- Netspend doesn’t allow wire transfers. If you regularly receive inbound wire transfers, it would be better to consider the regular checking account.
- The Card has a spending limit of $5,000. It means that you can’t make purchases that amount to more than this limit. Also, you cannot withdraw more than $400 in one transaction at an ATM. These are some of the serious drawbacks that cut off many people. Other than the $5 for account maintenance, there also miscellaneous charges while using these cards.
7. Control™ Prepaid Mastercard®
Control™ Prepaid Mastercard® is issued by MetaBank, which is a member of FDIC. It helps people who like using credit cards to make purchases but cannot have them.
Features and Benefits
You don’t have to own a bank account to acquire this Card. The Card allows direct deposit of checks. Therefore, you can always receive your funds ahead of others who use paper checks. Your checks can be deposited into your prepaid account directly. Through this, you won’t have to struggle in those cash stores to cash your paper checks. The Card doesn’t have interest charges nor late fees as you are spending your own money. In case you want to close your account, you won’t e charged for that. The loading fee that many other cards impose is not necessary with Control™ Prepaid MasterCard®.
The major drawbacks associated with this Card are:
- The Card charges high monthly fees of $7.95. This fee has no waiving mechanisms.
- All transactions at ATMs are charged. This fee eliminates potential holders looking for prepaid cards that do not charge ATM fees for withdrawals.
8. Brinks Prepaid MasterCard®
Just like many other prepaid cards, Brinks prepaid MasterCard allows you to enjoy the best banking options. It will enable a direct deposit to your prepaid account. All your paychecks, government benefits, or tax refunds can be directed to your Brinks prepaid MasterCard account. Since it is not a credit card, you don’t suffer the interests and late fees charges.
Features and Benefits
You can install Brink’s Money prepaid mobile App in your mobile device for easy account management. With this app, you can transact and receive account notifications on your devices. The monthly account maintenance fee is considerably low. If you set up a direct account deposit, you are entitled to a subsidized monthly plan.
Brink’s Prepaid MasterCard offers optional savings account with high interest. This feature is accompanied by a reduced monthly charges plan, which is a great relief to cardholders. There are family and friends who invite referral bonuses. If you invite somebody and happens to sign up and load their cards, you are entitled to this bonus.
Pros of Prepaid Credit Card
- Prepaid cards can help you to manage your finances with ease. You can use prepaid cards to set budgets that may be hard using debit or credit cards. If you find yourself struggling with mismanagement, go for a prepaid card, and it won’t disappoint.
- To acquire a prepaid credit card, you don’t need to have a good credit rating. Therefore, almost everyone can apply and get it. Also, you don’t need to have a checking account. This is a good substitute for all people who cannot open a checking account and don’t want to deal with their paper money.
- These cards are a safer way of accessing money without carrying paper cash. The Consumer Financial Protection Bureau has come up with rules to cover these cardholders, just like debit and credit cardholders.
- The new rules provide consumer protection. For example, if someone steals your card and uses it to purchase if you report timely, you’re compensated. These rules cover all prepaid accounts, whether in mobile or internet-based accounts.
- These cards are a great teaching tool for the kids. Parents can use these cards to offer their children financial education practically.
- They can act as gifts. Open-loop cards can be given out as presents instead of the traditional standard gift cards. They are flexible, and the recipient can cash the Card anywhere where the issuing network is accepted.
Cons of Prepaid Credit Card
- After acquiring your Card, you must register it. Failure to do so may limit the features you can access on your Card. For example, you may not be able to add money, make withdrawals on an ATM, or make payments online.
- Prepaid cards have lots of fees accompanying them. There are costs in buying them and maintaining some of them requires payments. Examples of extra fees you may pay include; inactivity fees, activation fees, each purchase fee, customer service inquiry fees, etc.
- They do not send reports to the Credit Bureau. This means that they do not help you build your credit history. They act as an expenditure control tool. It cannot help repair your credit.
- Credit cards are not accepted everywhere. You may end up stranded without money and you wanted to pay with a card where they are not allowed. Not all companies accept prepaid cards.
- Some cards are so rigid. Whereas some offer an overdraft option, some won’t allow you to make a payment if your purchase is beyond your card balance.
- The cards have limited and different customer protections and benefits. Some credit cards may offer the holders account protections, extended warranty, zero liability for illegal transactions, etc. Others may have no such benefits at all.
FAQ – Frequently Ask Questions
Are Prepaid Credit Cards a Good Way to Build Credit?
No. Even though you can monitor your credit using some credit cards, your FICO credit score won’t be affected. Credit cards will just help you to enjoy the benefits of a card even if you don’t qualify for a credit card. However, your use will not affect your credit score in any way. This is because prepaid credit companies don’t report to the credit agencies.
Which banks offer prepaid credit cards?
- US Bank
- American Express
- Green Dot Bank
- Meta Bank
- Republic Bank
Can anyone get a prepaid credit card?
Yes, anyone can get a prepaid credit card since no consideration to your credit. Also, people who do not own any bank account can apply and get a prepaid credit card.
Is there a fee for prepaid credit cards?
Yes. Prepaid credit cards charge a different fee for different services. Some of the services charged include;
- Purchase fees
- Inactivity fees
- Reloading or card replacement fee
- Monthly charges
- ATMs transactions charges
- Customer service fees
- Overdraft charges
- Card activation fees
Do prepaid credit cards have a limit?
Yes. Different prepaid credit cards have got different limits. There are daily and monthly limits that are set by various issuers. Depending on the method of adding money to your Card, your limit is determined.
Does wells Fargo offer prepaid credit cards?
Yes. Wells Fargo provides a prepaid Card known as Wells Fargo EasyPay® Card. The Card has the following features and benefits;
- Zero liability protection. Incase your Card is acquired and used illegally; you report you’ll be compensated.
- Uses chip technology to making it hard to duplicate.
- Fraud monitoring
- In case you lose your Card, the company will help you get it back at no extra cost.
If you don’t qualify for a bank account or a credit card, prepaid cards are there for you. You don’t have to struggle with cash when paying your bills again. This will allow you to access advanced banking options.
A prepaid credit card will help you manage yourself better than helping you access paperless cash to pay your bills. It is a smart way to keep you within strict financial principles. You cannot spend more than what you have loaded in your Card. It helps in a great way to avoid an unnecessary purchase that will compromise your budget.
If you are that person with damaged credit, also, this Card has got you. Your credit won’t affect you, and it’s a relief. If you want to monitor your credit progress, you can enroll yourself in the secured cards. These will grant you access to your credit and offer tools to track your progress. The bottom line is that prepaid credit cards are a revolutionary financial tool worth considering.