2024's Top Prepaid Credit and Debit Cards | Bankrate (2024)

Prepaid debit cards are similar to debit cards, except prepaid cards are not connected to banking or checking accounts. Instead, funds are loaded onto the card, then reloaded when those funds run out.Prepaid card users load funds onto the cards — either online, in person at specific locations, by depositing checks or reloading with cash.

Think of them as a cross between gift cards and debit cards — they have a card number, CVV code and expiration date like debit and credit cards, but no bank account associated with them. They also don't usually impact your credit score, as prepaid card issuers typically don’t check your credit when you apply, and they won’t check your banking history (though this isn’t always the case).

However, you should keep in mind that most prepaid cards have fees associated with them, such as:

• Reload fees
• Monthly fees
• ATM withdrawal fees
• Inactivity fees
• Transaction fees

While both function similarly, there are significant differences between prepaid cards and debit cards. For both types of cards, you can only spend the amount of money linked to or loaded onto the card. Prepaid cards and debit cards also look similar: both have card numbers, CVV codes, expiration dates and are often made of plastic with a magnetic stripe on the back. They work the same when checking out at stores or online. Neither has credit limits or revolving credit lines since the issuer or bank is not loaning the cardholder any money.

Where prepaid and debit cards differ is where those funds are stored. Debit cards are linked to a checking account with a bank or credit unionwhere you can add more money to your checking accounts via mobile deposit, direct deposit, ATM cash deposit or bank-to-bank transfers. That money is then available to spend with your debit card.

Prepaid cards aren’t linked to a checking account, and customers load and reload money on the card directly, much like a gift card — bypassing the need for bank accounts altogether.

Prepaid cards are an excellent option for anyone with difficulty accessing traditional banking services, but not all prepaid cards are created equal. Here are some things you should keep in mind while shopping for a prepaid card.

• Take a look at the fees. One of the reasons many people have a difficult time accessing traditional banking services is because of the costs. If your prepaid card charges a litany of fees, such as ATM fees, monthly service fees or reload fees, you should consider if the card is worth it.
• Know your loading options. How difficult or easy will it be to reload your prepaid card? Are fees attached? Some prepaid cards will allow you to reload your card with ACH transfers, but you’ll often reload manually at an ATM. It’s important that you have access to several ATMs in your area.
• Make sure the card offers mobile access. Mobile banking is becoming increasingly popular, and for good reason. It’s convenient, safe and can give you peace of mind. The best prepaid cards will offer you the option to use the cards online and access to a mobile app.
• Consider if you’re banked or underbanked. Prepaid cards provide several benefits to people who don’t have access to traditional bank accounts (unbanked people) or access to banking services is inconvenient or too expensive (underbanked people).

If you’re a person who has struggled to gain access to traditional banking services because of upfront costs (such as deposit minimums or initiation fees), a prepaid card might be the answer.

When to use a prepaid card

Prepaid debit cards let you use plastic when shopping online or in stores without the need for a traditional checking account. It’s ideal to use a prepaid debit card in the following scenarios:

• You’re a parent or guardian who wants to give your teenager a card that isn’t linked to your personal checking or credit card account to make purchases online or in person. With a monthly spending limit, prepaid cards can teach teenagers budgeting and responsible card use early in life before they open their own account.
• You’re cutting back on spending and need hard limits, which prepaid cards provide. You can reign in your spending every month by only using a prepaid card — once the money is spent, you can force yourself to wait until the new month to reload the card before swiping again.

How to maximize a prepaid card

When it comes to managing your spending and avoiding debt, a prepaid card can be valuable. With the right features and responsible usage, you can maximize the benefits of a prepaid card while staying in control of your finances.

Research and compare cards. Each prepaid card may come with its own set of features, fees and limitations. By conducting thorough research, you can find a card that aligns with your specific needs and financial goals. Look for cards with low or no activation fees, reasonable transaction fees and useful benefits tailored to your requirements.

Set a budget. One of the key advantages of using a prepaid card is that it allows you to set a budget and stick to it. By loading only the amount you plan to spend onto the card, you can avoid overspending and accumulating debt, so it's essential to do so with a strategic approach.

Strategize your reloads. Consider your spending patterns and avoid reloading large sums of money unnecessarily, as it might tie up your funds or expose you to additional fees. Plan your reloads effectively. Strike a balance between having enough funds and not maintaining an excessive balance on the card.

How to avoid pitfalls with a prepaid card

When it comes to managing finances, prepaid cards have gained popularity. They are convenient, widely accepted and can be used for online purchases, bill payments and foreign transactions. It can also help as you try to tighten your budget.

However, there are some drawbacks to consider:

When evaluating the best prepaid cards, we take into account several factors, including how cards score in our proprietary card rating system and whether they offer features that fit the priorities of a diverse group of cardholders, from low fees to wide acceptance to earning rewards.

We analyzed the most popular prepaid card options and scored each card based on its fee structure, rewards rate and earnings, perks and more to determine whether it belonged in this month’s roundup.

Here are some of the key factors that we considered:

Ryan Noonan is a former writer for Bankrate and CreditCards.com and is a graduate of the School of Journalism at Ohio State University.

Tracy Stewart is a personal finance writer specializing in credit card loyalty programs, travel benefits, and consumer protections.

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