Prepaid debit cards can be very useful. They’re great for people who can’t get an account with a standard bank or credit union. They work well for direct deposit paychecks, and they’re often used for things like tax refunds. Some consumers have even learned that prepaid debit cards can be used as a powerful money management tool.
There are quite a few different providers of prepaid cards these days – a testament to their popularity. Each prepaid card will have its own schedule of fees and charges, and their terms of service may include things like transfer requirements, minimum balance thresholds and monthly service fees. It’s important to examine each card’s specific fees before making your choice.
Here are some features to compare and contrast:
In-Store: One of the more intuitive ways to load a card is to take cash to a participating retailer and do it at the register. This is the same method used to purchase and load the card initially, except that the cashier will swipe your existing card to make the deposit.
Check Deposit: Some large retailers allow you to deposit printed checks directly to a prepaid card. You’re usually limited to government and payroll checks, but this method is a quick and simple way to both load the card and bypass check cashing fees. For example, Walmart Cash Centers usually offer this service.
Online Transfer: Certain prepaid cards allow you to transfer funds between other cards on their network. Often, this is offered without fees for the transfer, making it a possible alternative to a money transfer service like Venmo (as long as you and your friends all have cards on that network.)
Direct Deposit: This method is typically the easiest and most cost-effective means of loading a card. Not only is it convenient, but many card issuers will waive their monthly maintenance fee if a certain amount of money is deposited each month via direct deposit. Most prepaid card issuers also allow you to choose how much of a direct deposit to load onto the card each time, making it great for setting aside a portion of each paycheck.
Bank Account Transfer: While prepaid cards aren’t usually linked to a bank account, they will still have an account and routing number (like a checking account.) This makes it possible to include them in a normal bank transfer in most cases.
Purchase Fee: Most prepaid cards will charge a fee when you first purchase and load them. Expect the fee to range from $3-$5 depending on the card provider and where you’re purchasing it. If you want to avoid this initial fee, you can try ordering your card online. Many prepaid card issuers will waive the purchase fee for cards that are ordered from their website.
Maintenance Fee: Expect every card to charge a monthly fee. This is similar to how banks charge checking account fees, and it’s one of the “costs of doing business” that’s hard to avoid. Some cards have been known to waive their fee if a certain amount is deposited during the month, but you will need to check the terms of service on your particular card to learn more. These fees are usually around $5 a month.
ATM Fees: There’s a good chance that your prepaid debit card is part of a network, such as the Visa Clear Prepaid program, that offers waived ATM fees within that network. Even so, you will be charged fee for cash withdrawals from ATMs out of the network, so expect a fee in the realm of $2.50-$3 for each. Depending on your card provider, you may also be charged for balance inquiries at ATMs, so your best bet is to stick to checking your balance online.
Teller Withdrawals: Face-to-face withdrawals from bank tellers will usually incur the same fee as an out of network ATM withdrawal.
Lost Card: Replacing a lost card will typically cost you anywhere from $5-$10.
Foreign Transactions: Transactions made outside of the United States will typically carry a foreign transaction fee, similar to the fees added on by banks and credit card issuers. This fee will usually be anywhere from 2%-4% of the purchase total.
Christopher has an MBA from a top Canadian University and a decade of Big 5 banking experience plus another decade of marketing knowledge. She has a passion for writing about financial topics and has founded and developed the brand of Underbanked®.