What are the Pros and Cons of a Prepaid Debit Card?

  • 4 min read

Prepaid debit cards are a fairly recent phenomenon in Canada but they have proved to be extremely popular and offered by a number of the big Canadian banks, and smaller players either in VISA or Mastercard format. This article explains some of the reasons why and also some things to watch out for.

UPSIDES

Available To All

Because the amount on the card is prepaid, there is no requirement for a credit check and therefore anybody can obtain one.  You don’t even need to have a bank account.  A prepaid card can even be purchased and given to a child to use who would not be eligible for their own card.

Ideal For Gift-giving

Many people feel uncomfortable giving actual cash as a gift.  However they may not wish to purchase a gift card instead as that greatly limits the stores at which the card can be used.  A Prepaid card can be used wherever credit cards are accepted.

A Handy Alternative

People who are travelling abroad or making online purchases may not be comfortable using their regular credit card for fear of losing the card or suffering from fraudulent activity.

A Good Control for Big Spenders

If you have trouble controlling your spending, then a prepaid card could be ideal because it won’t let you spend money that you don’t have.

DOWNSIDES

The Hidden Costs

Prepaid cards can end up being quite expensive over time and charges can eat significantly into the prepaid balance:

  • Activation fee – this is often a fixed fee regardless of the amount on the card. This can prove to be quite a large percentage eating into a smaller card such as $25 or $50.
  • Load fee – many prepaid cards are “rechargeable” so that they can be used more than once, however there is usually a charge for that
  • Service Fee/Maintenance Fee – many cards charge a periodic fee simply for keeping the card active. This can prove very expensive if the card is not used for a number of months.
  • Replacement Fee – if the card is lost, you will be charged a fee for replacement

It’s Cash!

A prepaid card is effectively cash and should be treated as such.   There are fewer security measures in place compared to a conventional card, so you can assume it will be used if lost or stolen.  Although a replacement card can be obtained in some circumstances, this will be a hassle and will cost you.

Tracking your balance

It may not be easy for you to track how much is left on the card as you won’t get a monthly statement or access to an online account.

It seems that prepaid credit cards can work well in certain circumstances but, given the costs involved, a conventional credit card option will be better, if you have good enough credit to obtain one.

Why Choose a Prepaid Visa Credit Card?

If you need a secure, yet still convenient alternative to cash, cheques, or even traditional credit cards, then a prepaid Visa credit card could be the solution you’ve been seeking. You have access to your money whenever you need it, wherever you happen to be!

With a prepaid VISA, you won’t have to spend time in line to pay your bills in cash or pay fees just to get your money when it’s payday. You can pay online, over the phone, and wherever VISA is accepted!

Prepaid Cards Often Have No Credit Check!

Because you’re the one putting money into the card, most prepaid VISA credit cards have no credit check involved. This means no matter how bad your credit is, you can be approved for one of these cards!

If you’re looking for a flexible way to make your spending more secured, then prepaid VISA credit cards are a great way to help you save time and money. Why not see how much one of these prepaid cards could help you out today!

Christopher - BSc, MBA

With over two decades of combined Big 5 Banking and Agency experience, Christopher launched Underbanked® to cut through the noise and complexity of financial information. Christopher has an MBA degree from McMaster University and BSc. from Western University in Canada.