Everything You Wanted to Know About How a Prepaid Card Works
Maybe you’ve heard the term ‘prepaid card’ floating around the past few years. However, you’re not quite sure what prepaid cards are. You’re also not sure if they come with any fees, or if there are any eligibility requirements. This article will answer your questions. We’ll talk about the best prepaid cards and reloadable prepaid cards. We’ll also touch on various questions you may have about prepaid cards. By the end, you’ll know the important key points that go into prepaid cards.
What is a Prepaid Card?
A prepaid card is a credit card that you load money onto. It acts like a debit card, except you can’t spend more than you load onto it. You’re spending your own money, just in a more convenient form. You can use it anywhere your card brand is accepted. Visa, MasterCard, and American Express offer prepaid cards.
What is the Difference Between a Debit Card, Credit Card, and a Prepaid Card?
There are a few key differences between the three cards. A prepaid card varies from a debit card because it’s not linked to your bank account. You spend money you load in advance on to your prepaid card. Unlike a debit card, you can’t overspend. As of the writing of this article, prepaid cards have fewer safety measures than a debit card. This means if your prepaid card is stolen, lost, or used without your permission, you may not have any protection.
A prepaid card and a credit card are very different. With a credit card, you’re borrowing money from a lender. You will eventually have to pay this back. With a prepaid card, you’re spending money you loaded in advance. So, there is no pay back because it’s yours originally.
What Fees are Associated with a Prepaid Card?
If you’re using a prepaid card, there are typically routine fees you’ll have to pay. These fees will vary depending on the card and the company that supplies them. We will go over a few standard prepaid card fees.
Additional Card Fee
If you lose your card, or if it someone steals it, you’ll be charged to replace it. Also, if you want to add an authorized user on to your account, you may be charged an additional card fee. If you choose to do this, you will be giving them access to your money. They will have to call customer service and verify themselves before they can use the card.
Many prepaid cards will charge if you withdraw money off the card through an ATM. The amount varies by company. You may also only have this fee once a month or every time you use an ATM.
Balance Inquiry Fee
If you can’t remember what amount is on your card, you may be charged to check it. Whether you do it by phone or by ATM, there is usually a fee. It is worth noting that many cards offer at least one free way to check your balance. Checking it online through your account is normally free.
Bill Payment Fee (Convenience Fee)
You will be able to pay your bills over the phone with your prepaid card. However, there may be a bill payment fee or a convenience fee to do so. If this is the main reason you’re getting a card, shop around. Some prepaid cards offer lower or no bill payment fees.
Cash Reload Fee
Many reloadable prepaid cards charge a fee to add money back to the card. You will usually incur this fee when you try to reload at a retail location like a gas station. The company usually sets the amount, and it varies. If you use direct deposit, this is normally free of any fees.
Your card company wants you to continue using your card each month. If you let it sit for a period of time, you might get an inactivity fee. The lengths of time and cost vary from company to company.
Your monthly fee is a fixed fee you’ll pay each month whether or not you use the card. The company will automatically deduct this fee from your balance. If you have no money on the card, it’ll go negative. The next time you load money, it’ll take the negative balance right away. You might be able to get this waived if you have your check direct deposited on to your card.
This fee may occur each time you use your card for a specific type of transaction. It is common not to have this fee if you pay a monthly fee. The companies usually charge one of the other and not both.
Common Questions People Have About Prepaid Cards
Now that we’ve gone over the most common prepaid card fees, we’ll go over questions. These should help address any remaining questions or concerns you may have.
How Do You Dispute an Unauthorized Transaction with Prepaid Cards?
If you find a charge on your card that you didn’t make, you can dispute it. It is a good idea to contact the lender first and check that you just didn’t forget. You should call customer service as soon as you notice the charge. You may also have the option to dispute the charge online. This will vary by card, so be sure to check their identity fraud policies.
What Happens if Your Prepaid Card Expires?
If your card expires with a balance, that money is still good. Even if this is a gift card, the money is good for five years. You will have to call customer service and ask for a replacement. Many prepaid card companies will send you one before your original card expires. There is usually no extra charge for this service.
Does Your Credit Score Affect Your Eligibility With Prepaid Cards?
Your credit score usually doesn’t factor into eligibility for one of these prepaid cards. The reason being that you aren’t borrowing money, you’re loading your own. They may ask for your name and address to verify your identity at the initial money load. This is called activating your card. However, if the company can’t verify you, they may elect not to activate the card. Additionally, if they find that you’ve had fraudulent activity in the past, they may decline to activate it.
Should You Use Credit or Debit When You Use Your Prepaid Card?
If you’re paying at a store and there is a pin pad, you have the option of credit or debit. No matter which one you choose, the money will come out of your card’s balance. If you choose the credit option, you’ll sign your name. If you choose the debit option, you’ll enter your pin number. You should check and see which option has higher fees associated with it. If one has higher fees than the other, use the less expensive option.
This article has gone through exactly what is a prepaid card. Creditfast has gone through several of the standard fees that come with a prepaid credit card. The best prepaid cards will have low fees. You might have to shop around to find them, but they’re there. Lastly, we finished by talking about common questions people have had. You should be able to choose a prepaid credit card with confidence after reading this article.
All prepaid card application offers contains our editor’s rating and objective opinion. Most of the credit card offers shown are from our advertising partners, Credit Fast has reviewed the features and benefits of each of the prepaid credit cards discussed and ranked them in the order of our editor’s recommendation.
Prepaid Card Application Offers Vs. Bad Credit Card Applications
Bad Credit Card Applications are designed for people rebuilding their credit or have no credit. Some people qualify for a Capital One Secured Card with no annual fee and only a $50.00 security deposit. Security deposits on the Capital One Secured card range from $50.00 to $300.00 for a $300.00 credit limit. There is no annual fee or other fees required to get approved for this secured credit card.
In addition to prepaid credit card applications, many people consider credit card applications for bad credit. Bad credit card offers can either be secured or unsecured. Some bad credit card application offers have lower fees than prepaid cards. Also, a credit card builds credit history that can help a person later to secure credit and at lower interest rates.