Credit card companies promote prepaid debit cards as a convenient alternative to credit cards. They typically market them to people who do not have a bank account. However, prepaid debit cards have a much wider appeal.
A recent Pew report found that many people use prepaid cards in addition to mainstream financial products. Most cardholders use them to complement rather than replace a checking account. In fact, 59 percent of prepaid cardholders have a checking account, and 45 percent have used a credit card in the past.
People can use prepaid debit cards at any business that accepts MasterCard or Visa cards. Most online stores accept them. People can also use them to access cash at an ATM.
What is a Prepaid Debit Card?
A prepaid debit card is a plastic payment card that gives the cardholder access to funds. Like a bank debit card, a prepaid card is secured by a cash deposit. When the initial deposit is spent, the cardholder must add more funds to use the card. For this reason, prepaid cards are sometimes called reloadable cards.
Gift cards work like prepaid cards, but they are not reloadable. Secured credit cards have similarities and differences. Although they require a cash deposit, they also include a line of credit.
Benefits of a Prepaid Debit Card
The Kaiku Visa prepaid debit card is an example of a reloadable card. This type of card is best for people who want to replace or complement a bank account. It can help them avoid the banking fees that come with a checking account.
A prepaid card is also better than a check-cashing store, which is risky and expensive. Many cards have a direct deposit option. This allows cardholders to deposit their paychecks or government benefits to a reloadable card.
Prepaid Debit Card Fees
Most prepaid debit cards charge a monthly fee. However, the best cards do not charge a fee for each transaction. People can often avoid the monthly fee if they load a certain amount of money on the card each month.
Even with a monthly fee, a prepaid card can be a good financial choice. It can help people control their spending and avoid overdraft fees. There is no need for a credit check, and some cards include liability protection.