Prepaid cards have become more and more popular over the past few years, not least because they offer an alternative to a more traditional debit card or credit card.
On the one hand, prepaid cards are very similar to debit/credit cards, insofar that they allow you to make purchases online, in-store and at ATMs. Moreover, they are usually backed by either Visa or MasterCard, meaning that you can use the card at millions of merchants worldwide.
However, prepaid cards are unlike credit cards, because they do not come with a credit limit of any sort. They are also unlike debit cards, as prepaid cards are not linked to a conventional checking account. Instead, you can only spend an amount that is equal or less to the amount you have topped-up on the card.
If you’re thinking about obtaining a prepaid debit card and you would like more information, be sure to read our in-depth guide. Within it, we’ll cover everything from what a prepaid card actually is, how they work, what you can do with it, who they are suitable, and more.
Best 5 Prepaid Cards
- 1 Best 5 Prepaid Cards
- 2 What is a Prepaid Card?
- 3 What can I do With a Prepaid Card?
- 4 How Does a Prepaid Card Work?
- 5 How Much Does a Prepaid Card Cost? Fees and Charges
- 6 Compare Prepaid Cards
We have scoured the market to help you along the way, here we have listed the best 5 prepaid cards currently available in the US market.
Netspend® Visa® Prepaid Card
Although we briefly mentioned NetSpend earlier in our guide as a solution to top-up your chosen prepaid card, the company is also behind a prepaid card of its own. In fact, the Netspend Visa Prepaid Card is one of the most popular cards in the prepaid market. Alongside its two other cards, Netspend claims to have served more than 10 million customers in the US since its inception in 1999.
Moreover – and as noted earlier, the company has 130,000 in-store locations spread throughout the US, which makes it super easy to top-up your card if you prefer using cash. In terms of the fundamentals, the card is backed by Visa, which allows you to use it at millions of locations – both in the US and overseas.
Netspend gives you two options when it comes to fees – a pay-as-you-go plan, or a monthly plan. Regarding the former, you will not be tied into any monthly fees, although you will need to pay more for using the card. For example, you will need to pay $1 and $2 every time you execute a signature or pin transaction in-store, respectively. Moreover, ATM transactions are charged at $2.5 per withdrawal, while foreign ATM transactions are charged at 3.5%.
On the contrary, both signature-based and PIN transactions made in-store cost nothing with the monthly plan, and you will also avoid the $2 per transaction fee that comes with the pay-as-you-go plan. Furthermore, the pay monthly plan allows you to have your salary paid onto the card, which its pay-as-you-go counterpart doesn’t. However, the paid-for plan will cost you $9.95 per month, so the decision will boil down to how much you think you will need to use the card.
Brink’s Prepaid Mastercard®
The Brinks Prepaid Mastercard is also hugely popular in the US. Issued by US financial institution Axos Bank, the Brink Prepaid Card can be used wherever MasterCard is accepted. This includes online, in-store, at ATMs, and while travelling overseas. Much like in the case of the Netspend Visa, the Brink MasterCard comes with two payment options. If you opt for the pay-as-you-go plan, then you will not need to pay a monthly fee.
This means that signature and PIN purchases will cost $1 and $2 per transaction, respectively. This mirrors the fees charged by NetSpend, as does the $9.95 monthly fee charged for the paid plan. Furthermore, a 3.5% foreign transaction fee will be charged on non-US dollar purchases. This is also the case with the monthly plan.
If you are planning to use the prepaid card to have your salary or government benefits paid in, then you can benefit from the provider’s Reduced Monthly Plan. In a nutshell, the plan takes the monthly fee from $9.95 per month down to just $5 per month.
In doing so, you could also benefit from a $10 cushion, which means that your transaction will still be executed as long as you are not over by more than $10. In order to qualify for the Reduced Monthly Plan, you will need to deposit at least $500 into your Netspend account every month, which needs to come in the form of benefits or your salary.
Western Union® Netspend® Mastercard® Prepaid Card
Western Union is the largest money transfer company in the world, with the US institution first offering its services way back in the late 19th century. As such, it makes sense that the company has since diversified into the ever-growing prepaid card arena. As the name suggests, the card is backed by MasterCard, and it is also integrated with Netspend. This makes it really convenient to top your card up, as you have more than 130,000 US locations to choose from.
One of the overarching benefits of using the Western Union prepaid card is that it makes an ideal travel companion. For those unaware, the main business model employed by Western Union is that of transnational transfers – especially in remote and third-world regions. In most cases, the beneficiary is required to collect the money in person. Not only is this inconvenient, but it can also be costly, too.
The solution to this conundrum is to use the Western Union Prepaid MasterCard to receive the funds. As soon as the transfer has been paid, the end-user can access the funds via the prepaid card in a matter of minutes.
A second key benefit to the Western Union Netspend Prepaid MasterCard is that you could qualify for its fast-track direct deposit service. In a nutshell, if you choose to receive your payroll or government benefits directly onto your prepaid card, Western Union could allow you to receive the funds 2 days earlier than you normally would. Furthermore, the Western Union prepaid card also comes with a handy savings account that pays a top rate of 5% on balances up to $1,000.
If you’re the type of person that likes to keep track of your spending via your mobile phone, then you’ll also be pleased to know that the Western Union prepaid card comes with a native mobile app. Available to download free of charge on both Android and iOS devices, the app allows you to send and receive money, top-up your card, set-up real-time spending alerts, and keep track of incoming and outgoing transactions.
Self — Credit Builder Account
Formally known as Self Lender, the Self Credit Building Account is a prepaid card that comes with a specific purpose. As the name suggests, the card affords you the opportunity of rebuilding a damaged credit score. This is also the case if you have no credit score at all, either because you recently moved to the US or because you recently turned 18. Either way, here’s how the Self Credit Builder program works.
Once you have applied for the card, you will then need to top it up as you would do with any other prepaid card. The amount that you load on to the card will then act a security deposit, much in the same as a conventional secured credit card. This means that your ‘credit limit’ is likely to mirror that of what you put up as a deposit. Next, you are then advised to use your card on everyday purchases – such as on retail, travel, or gas.
At the end of each month you will then receive a statement that outlines how much you owe. When you pay the balance off in full within the agreed time-frame, Self Credit Builder will then report this to the main three credit bureaus. The idea is that by repeating this process each and every month, the credit bureaus will look at this favourably and thus – increase your credit score.
In terms of the fundamentals, the card is backed by Visa, so you will have no issues finding merchants that will allow you to make purchases. Most importantly, the card does come with a fee of $25 per month, which is much more than the other providers we have discussed thus far. However, some would argue that this represents excellent value when you consider the potential prospect of being able to rebuild your credit profile.
GoBank® Checking Account
The final provider on our list is that of GoBank and its checking account. Don’t let the name fool you, as although the card comes with a number of similarities to that of a checking account, it acts more like a prepaid card. In fact, the main selling point to the card is that it offers an alternative to those that are unable to open a conventional checking account – either because their credit rating is too low or because they don’t have any credit at all.
Firstly, the card itself is backed by MasterCard, meaning that you will have ample opportunities to make purchases online, in-store, and overseas, as well as at ATMs. Furthermore, the provider allows you to make fee-free ATM withdrawals at more than 42,000 US terminals, which is great. We also like the fact that the GoBank checking account allows you to deposit cash for free at participating Walmart stores.
If you are not conveniently located close to a Walmart store, you also have the option of depositing funds at a 7-Eleven or CVS pharmacy, although this will cost $4.95 per deposit. In a similar nature to some of the other cards we have discussed thus far, GoBank allows you to get your salary or government benefits paid onto the card. Moreover, you will also benefit from the fast-track service that gives you access to your money two days early.
Other Types of Credit Cards
- What Are the Best Secured Credit Cards?
- What Are the Best Balance Transfer Credit Cards?
- Best Credit Cards for People With No Credit
- What Are the Best Credit Cards for Students?
- Best Reward Credit Cards
- Best Cash Back Credit Cards
- Best Travel Credit Cards
What is a Prepaid Card?
A prepaid card is simply a payment card that allows you to make purchases with money that you have previously loaded onto the card. In this sense, a prepaid card operates in a similar nature to a debit card, insofar that you are only spending your own money – as opposed to using a credit card that utilizes a prearranged credit limit. This means that were you to attempt to make a purchase for more than what you have loaded on to your prepaid card, the transaction would simply be declined.
However, a prepaid card is unlike a debit card because it is not backed by a traditional bank account. This means that you won’t be accustomed to the benefits that come with a conventional debit card, such as a pre-approved overdraft limit and in some cases, fraud protection. On the flip-side, prepaid cards sometimes come with certain benefits – such as a cashback or rewards program on eligible purchases.
In this sense, a prepaid card operates similarly to a rewards credit card, albeit, without a credit limit. One of the overarching benefits of obtaining a prepaid card is that in the vast majority of cases, anyone can obtain one. As such, even if you have a less than ideal credit profile, it is likely you will still be eligible for a card.
The reason for this is that prepaid cards have no relationship with credit, meaning that the underlying institution is not taking on any risk by issuing you the card. However, it is likely that you will still need to verify your identity before using the card – fully in line with US anti-money laundering and terrorist financing laws.
As we will discuss in more detail further down, it is also important to note that prepaid cards are ideal for countering the threats of fraud. For example, if you want to purchase sometime online, but you’re somewhat nervous about the legitimacy of the website, prepaid cards are highly conducive.
This is because you can simply load your prepaid card with an amount equal to the transaction size. If the merchant then attempted to take more money from your card further down the line, they would be unable to as a prepaid card cannot go overdrawn.
What can I do With a Prepaid Card?
First and foremost, prepaid cards operate much like a debit or credit card, insofar they will either be backed by Visa or MasterCard. As such, you should be able to use the card at any location that supports the respective issuer.
With that being said, here’s a breakdown of some of the options you have when using your prepaid card.
One of the obvious spending options that you have at your disposal is that of online shopping. This is especially true if you are unable to obtain a traditional debit or credit card, or if you are looking to reduce the risks of cybercrime. In terms of the purchase process, this is exactly the same as using a debit or credit card.
Once you are at the checkout page of your chosen online store, you would need to select the respective card issuer (Visa or MasterCard) that is attached to your card. You would then simply enter the card credentials, such as the 16 digit number found on the front of the card, expiry date, and the 3 digit CVV number. The online store will then debit the transaction amount directly from your prepaid card, meaning that the purchase is executed instantly.
On top of being a handy option for making purchases online, you can also use your prepaid card to buy things in-store. For example, you can easily use your card to pay for your weekly groceries, or to top-up your car with gas. Either way, the process is exactly the same as using a debit or credit card.
You see, when you hand over your card to the retailer, the underlying payment machine will not be able to differentiate between a conventional debit/credit card and that of a prepaid card. The reason for this is that the card is backed by Visa or MasterCard, which is who the payment machine will communicate with when attempting to debit the funds.
Once again, in-store purchases via a prepaid card will be executed instantly, as long as you have the required funds available on the card. Furthermore, in the vast majority of cases, the prepaid card will come alongside Chip-and-PIN technology. This means that you will need to enter your 4 digit PIN number every time you make an in-store purchase. This ensures that nobody can use your prepaid card other than yourself.
Withdrawing Cash From an ATM
In a similar nature to traditional debit cards, most prepaid cards allow you to make withdrawals from an ATM. This makes it super convenient when you need instant cash – as the prepaid card’s relationship with either Visa or MasterCard will give you seamless access to millions of US cashpoints.
As we will discuss in more detail further down, the fees associated with prepaid card ATM withdrawals are typically much higher than that of a debit card. You will likely need to pay the fixed-fee charged by the respective prepaid card issuer, as well as the fee charged by the specific ATM. On the flip-side, withdrawing cash with a prepaid card is usually much cheaper than a credit card – which not only charges a fixed and variable fee on each usage, but you will have interest applied instantly!
On top of being able to use your card online, in-store, and at a US-based ATM, one of the best advantages to obtaining a prepaid card is that it operates as an excellent payment source when travelling overseas.
- First and foremost, some prepaid cards are designed specifically for travel, meaning that you will benefit from super competitive foreign transaction fees. On the contrary, using a traditional debit card overseas can be a costly endeavour.
- Furthermore, prepaid cards allow you to keep tabs on your vacation spending. This is especially true when you consider the complexities of foreign exchange rates. By topping up a fixed amount as you go along, you can ensure that you don’t return to the US having spent more than you intended.
- Finally, using a prepaid card overseas is also a good option in reducing the risks of fraud, as merchants can only take what is available on the card.
Receiving Your Salary
Although the vast majority of US workers will have their salaries paid into a conventional checking account, there might come a time where you are unable to obtain one yourself.
This might be because your credit rating has been completely hampered, or because you only recently became a US resident.
Either way, this can be problematic when it comes to receiving your salary, especially if your employer does not have the means to settle your wages in cash. If this is the case, then you can always consider having your salary paid onto your prepaid card.
Take note, prepaid card providers often have a single checking account, meaning that all customers will need to transfer funds to the same bank account. This is why it is crucial that your employer supplies your unique account number when transferring your salary onto your prepaid card.
Failure to do so can lead to severe delays in the funds being credited to your account.
Access to Funds for Family, Friends or Employees
Depending on your personal circumstances, you might have a requirement to distribute cash to another person. For example, you might be a small business owner and require one or more staff members to purchase goods and services when they are out of the office. They might not have the financial means to pay for the purchase with cash upfront, so handing them a prepaid card is an excellent solution.
This is also the case if you need to distribute funds to a family member. For example, rather than constantly giving them cash, you can instead give them a prepaid card. Not only will this allow you to control how much goes on the card and thus – how much the individual is spending, but you can also keep full tabs on what purchases are being made via your prepaid account portal.
How Does a Prepaid Card Work?
So now that you know what a prepaid card is – and some of the many payment options it provides, we are now going to explain how the end-to-end process typically works. This includes the application process, verifying your identity, and of course – topping up the card.
Step 1: Choose a prepaid card that meets your individual needs
First and foremost, you will need to find a prepaid card provider that meets your individual needs. For example, if you are intending to use the card when travelling overseas, look for a card that comes with benefits such as reduced foreign exchange fees.
Alternatively, if you’re after a prepaid card to make in-store purchases, try to find a provider that offers cashback rewards on your common spending categories. To help you along the way, we have listed five of the best prepaid cards currently in the market at the end of this page.
Step 2: Apply for the prepaid card online
Once you have found a suitable prepaid card provider, you will then need to apply for the card online. In this sense, the application process is somewhat similar to that of a debit or credit card, insofar that you will need to provide some personal information. However, the process is significantly less bureaucratic, as the amount of information required is minute.
At this stage of the application process you will likely only need to provide the following information to be approved:
- Full name
- Mailing address
- Email address
It is also important to note that some prepaid cards require an upfront fee to cover the cost of distributing the card to you. If this is the case, then you will need to pay the fee with your debit or credit card online. Once you have completed the online application process, it typically takes 7-10 working days for the card to arrive at your mailing address.
Step 3: Activate the card and verify your identity
Once you receive the prepaid card at your mailing address, you will initially need to activate the card. This is to ensure that you, and only you, are in possession of the card. In most cases, you can either do this online or by calling the card provider directly. You will likely need to enter the full 16 digit card number alongside a unique PIN number that came with it in the post.
On top of activating the card for security purposes, you will then be asked to verify your identity. Before we explain how this works, it is important to note that you are under no obligation to verify your identity. However, if you don’t, your card will come with significant limitations. This will come in the form of reduced spending limits, and in some cases, the inability to withdraw cash from an ATM.
As a result, it is well worth spending the required time verifying your identity. To do this, you will likely need to provide your full legal name, date of birth, and government-issued ID. Regarding the final point, this will either come in the form of your driver’s license number or security social number. As soon as you complete the verification process, your prepaid card’s spending limits will be removed.
Step 4: Topping up your card
At this stage of the step-by-step guide, you should now have a fully activated prepaid card and have had your identity verified. As such, you will now need to top-up the card with some money. Otherwise, you won’t be able to use the card.
The specific top-up options available to you will depend on the respective prepaid card issuer. Moreover, the fees of each payment method will vary, so be sure to check this out before making the deposit.
Nevertheless, here are some of the main options offered by prepaid card providers when it comes to adding money.
- Bank transfer: Most providers allow you to transfer funds from your everyday checking account over to your prepaid card. In most cases, the prepaid card provider will have a single checking account that is used by all of its customers. As a result, it is absolutely crucial that you enter your unique customer number in the reference field when executing the transfer. Otherwise, the prepaid card company might find it difficult to match the payment to your account.
- Debit card: Most providers will also allow you to top-up your prepaid card with a conventional debit card. You should be able to do this via your online account portal, or directly over the phone. Either way, the funds should be credited instantly – although some providers might require a few hours. Take note, in the majority of cases prepaid card providers will not accept deposits in the form of a credit card, as the underlying fees can be costly.
- Netspend: If you prefer dealing with cold-hard cash, then you’ll be pleased to know that most prepaid card providers allow you top-up via Netspend. For those unaware, Netspend has over 130,000 in-store locations in the US, which you’ll typically find at Kiosks based at supermarkets, gas stations, and shopping malls. You simply need to hand over the cash alongside your prepaid card, and the Netspend agent will take care of the rest.
Once your top-up has been processed and added to your account, you can then proceed to use the prepaid card. Scroll up to our section entitled ‘What can I do With a Prepaid Card?’ to find out where you can use your card.
How Much Does a Prepaid Card Cost? Fees and Charges
If you have read our guide up to this point, then you’ll have a firm understanding of the many benefits that prepaid cards offer, where you can use one, and how the end-to-end process typically works. However, it is also important that you make some considerations regarding the cost of the card. The specific fees will, of course, vary from provider-to-provider, so you are best advised to check out for yourself before making an application.
Nevertheless, below we have listed some of the main fees and charges that you need to look out for when applying for a prepaid card.
First and foremost, you need to evaluate how much the card actually costs to order. Whether or not you need to pay anything to order the card will vary depending on the provider, although, if a fee is charged, it will likely cost in the region of $10. This is to cover the cost of the application itself, as well as the delivery fee.
Some of the most competitive prepaid cards that come with an array of benefits such as fee-free foreign transactions or cashback rewards will come with a monthly fee. Whether or not this is viable for you will depend on your personal circumstances, and how lucrative the benefits are. The reality is that traditional credit cards typically come with the most favourable rewards – be it fee-free foreign transactions, cashback rewards, or travel rewards.
However, the best deals are reserved for those with an excellent credit profile, so if you fall outside of this threshold, you might be forced to utilize the benefits of a prepaid card. In doing so, you might need to pay a monthly fee – which will vary in size depending on the provider and the account type you opt for.
You also need to consider how much the prepaid card provider will charge for using the card at an ATM. This will be charged on top of the fee payable to the specific ATM that you use. In most cases, the ATM fee will be fixed – irrespective of the amount that you decide to take out.
Foreign Transaction Fees
If you are planning to use your prepaid card when travelling overseas, you need to assess how much this is going to cost you. Although we noted earlier that some prepaid cards come with reduced, or zero, foreign transaction fees, this isn’t always the case. As such, you need to find out how much you are going to be charged on two key fronts.
Firstly, the prepaid card provider might charge you a fixed fee for using the card at a foreign ATM. Don’t forget, you’ll also likely need to pay a fee with the local ATM provider, which is added on top. Secondly, you need to be aware of what exchange rate you are paying. This is typically a variable percentage that is added on top of the transaction amount – and will often sit between 3%-5% if you are using a prepaid card that doesn’t specialize in travel.
Compare Prepaid Cards
Head over to our partner to compare the top prepaid credit cards and make your application.