Compare the Best Debit & Prepaid Cards

What Are Debit Cards?

Debit cards, also known as bank cards or check cards, are a type of payment card that allows you to access funds directly from your bank’s checking account. When you purchase something using a debit card, the bank immediately deducts the funds from your checking or savings account.

When using a debit card, you’ll typically need to enter your personal identification number (PIN) or provide a signature to authorize the transaction. However, the latter quickly disappears in favor of the former. The purchase amount is deducted from your account balance, eliminating the need for credit or borrowing, and as a result, there are no missed payments and no adverse credit impacts.

What are Prepaid Cards?

Prepaid cards, also known as prepaid debit cards or reloadable cards, are payment cards that allow you to load funds onto the card before making purchases. Unlike credit cards, which allow you to borrow up to a certain limit, prepaid cards require you to load money onto the card in advance. This means that you can only spend the amount of money that is available on the card, making it a useful tool for budgeting and managing your expenses.

Prepaid cards come in various forms, including general-purpose prepaid cards that can be used anywhere that accepts card payments and prepaid cards specifically designed for travel or specific retailers. They are typically issued by banks, credit unions, or other financial institutions and can be purchased online or at retail locations.

How Do Debit and Prepaid Cards Differ?

A prepaid debit card is another great option if you can’t access a bank account. Prepaid cards are similar to debit cards in that purchases are automatically and instantly debited from the card’s available balance. However, unlike a standard debit card, prepaid cards are loaded before use and are not tied to a checking account.

Here are some of the key differences between prepaid cards and debit cards:

Plenty of financial institutions offer these cards, from Chase to American Express. Some are even co-branded with companies like Walmart, PayPal, and Kroger. The application process does not involve a credit check, so getting one is as simple as submitting the necessary form, which you can generally do online.

What are the Benefits of a Debit or Prepaid Card?

Debit cards offer a huge array of benefits. Firstly, debit cards can help you stay within your budget. Since a debit card only allows you to spend the money you have, it prevents overspending and helps you avoid debt. Secondly, a debit card provides convenience. You can use it for online shopping, bill payments, and even cash withdrawals from ATMs.

No Interest Charges

With debit cards, there is no interest charged. As mentioned, you can spend what is in your account with a debit card, with anything over that limit either denied or approved but with an over-the-limit fee. Despite that, there are no interest payments with a debit card or minimum payments due at the end of the month. Make a purchase or transaction, and that amount is debited or credited to your account. It’s that simple.

Surcharge-Free ATM Access

Many banks, credit unions, and fintech lenders offer a robust network of fee-free ATMs. Here is a quick rundown of the fee-free ATM networks for major banks:

Convenience

Debit cards streamline the purchase process and eliminate the need for older payment methods, like checks. Currently, approximately 99% of merchants accept Visa, Mastercard, Discover, or American Express payment cards. Even better, many retailers let you charge an extra price to your in-store purchase and give you back that extra amount as cash back.

Rewards

Some debit cards offer rewards in the form of points or cash back. Debit card rewards are usually lower in quantity than credit cards, but most debit cards come with relatively modest fees.

Are There Drawbacks with Debit Cards?

Debit cards are useful tools, but they aren’t perfect.

Fees

While most debit cards avoid annual fees, some reward and high interest (think APY, not APR) debit cards charge a monthly plan fee for the best rewards. Beyond program fees, debit cards might feature charges for a whole lot of things you might have never considered, including:

• Cash reload (in-store with select brands)
• ATM balance inquiries
• Out-of-network ATM surcharges
• Overdraft fees
• Foreign transaction fees
• Card replacement or expedited delivery

Limited Fraud Protection

Credit cards provide greater purchase protection than debit cards. Credit cards offer robust Zero Fraud Liability protection, including chargebacks, something debit cards lack.

A chargeback is a form of refund where the card issuer refunds the purchase price to a cardholder at the cardholder’s request. Unlike a merchant-initiated refund, chargebacks allow credit cardholders to regain their money from an unscrupulous or dishonest merchant. Despite this, most debit cards protect unauthorized purchases for up to 60 days after a transaction – provided you notify the bank or credit union.

How Can You Get a Debit Card?

Because debit cards require no “hard” credit check to open (some banks may perform a “soft pull” to verify identity and view your credit profile, but these checks will have no adverse impact on your credit score), they are much easier to access for consumers of any type. Additionally, debit cards have no real age restrictions, meaning specialized products exist for teens to help introduce them to banking and financial responsibility.

Because debit cards are tied to a checking account, the easiest way to get your hands on a new debit card is by visiting the local branch of your preferred bank or credit union and opening a checking account. Most banks and credit unions give you a free debit card when you open an eligible checking account, with the debit cards either issued in person or through the mail within 7 to 10 business days.

Essential Features of Debit and Prepaid Cards

Like credit cards, debit (and prepaid debit) cards offer basic protections to keep you safe while you shop online or in-store. For instance, debit cards are typically associated with card networks such as Visa, Mastercard, or American Express, enabling global acceptance. The card network logo on your debit card indicates where it can be used, typically worldwide, although foreign transactions may incur a fee.

Beyond basic protections like Zero Fraud Liability, lost and stolen card reporting, and credit score monitoring, debit and prepaid cards provide other conveniences for cardholders, including ATM access, digital/mobile wallet compatibility with Apple Pay, Google Pay, Samsung Pay, PayPal, and other services, and EMV chip technology for boosted security when shopping.

How to Choose the Right Debit or Prepaid Card

Choosing the right debit card doesn’t have to be tricky. You’ll need to consider various scenarios and pieces of information, such as how often you plan to use your card, how much you plan to spend on your card, and any fees you might incur for using the card (including out-of-network ATM access, foreign transactions, card replacement, overdraft, and other charges).

Consider your needs closely before selecting a new checking account or debit card. Assess your financial goals and spending habits to determine the features and benefits you require from a debit card. Consider factors such as ATM access, rewards programs, international usage, and budgeting tools offered by different banks.

Here are the critical things to look for in a new debit or prepaid card:

Other items to look for with debit cards include:

• Intuitive online account management and mobile apps: Debit cards are tied directly to your bank account balance, unlike credit cards. Because of that, you should find a program or application that can help you easily track your current balance at all times. Many banks have their own free mobile banking apps available to download that serve this function, as do separate third-party companies.
• Daily ATM withdrawal limits: Even nowadays, the motto “cash rules everything around me” can still apply, such as when leaving a tip at a restaurant or haggling at an outdoor craft market. Always know what your daily ATM withdrawal limit is and any fees charged for taking your cash out to avoid ending up in an embarrassing situation at the register.
• Credit-building: Some debit cards now offer the ability to build credit with purchases. These debit cards act like secured credit cards, with the spending limit tied to the balance in your checking account.

Additionally, carefully research the bank’s reputation for customer service quality and availability, including 24/7 support and quick resolution of any issues. Reliable customer support can be crucial in emergencies or when dealing with potentially fraudulent activities. BestCards helps streamline this process by providing bank and lender ratings in reviews, helping to highlight what our team, the Better Business Bureau, and Trustpilot think about each issuer.

Other Things to Look for in a Prepaid Card

A prepaid card offers much of the freedom and security that comes with using credit cards, even if your past credit history is otherwise holding you back. Keep these tips in mind when selecting a prepaid card to add to your wallet.

1. Functional Features: Because every prepaid card works differently, knowing what your card can and cannot do is critical when choosing which one to go with. For instance, some prepaid cards cannot be used to set up recurring online bill payments while others limit the number of ATM transactions you can make. Read the terms and conditions of the card before ever loading it with funds to be sure it will work as you’d like it to.
2. Easy Reloading Options: Being able to conveniently add cash to your prepaid card is a major selling point, regardless of the issuer. Most cards allow you to transfer money from a bank account onto it, add money from an online payment processing account, have your employer directly deposit your paycheck onto it, reload it at a physical retail shop, or add funds using a separate reload card bought at a store.
3. Be Aware of “Hidden” Fees: When it comes to prepaid cards, “hidden” fees are likely fees that you didn’t know about because you didn’t read the terms and conditions before purchasing the card. Monthly fees and ATM fees can add up quickly if you’re caught unaware, putting you in a more difficult financial situation than the one you may already be in. Take a few minutes to read the fine print before making your decision to remain informed and aware of potential pitfalls ahead.
4. Online Management and Monitoring Tools: Because budgeting is so important when using a prepaid card, being able to easily track your spending is as well. Some (but not all) prepaid cards offer a companion mobile app that allows you to see exactly how much you’ve spent on the card and how much you have left, and others grant the ability to reload the card with cash right on your phone or tablet. As nearly everyone has a smartphone on them nowadays, using that tool to keep tally of your finances makes sense… and cents.
5. Theft Protection: Unlike cash in many situations, you may be able to recover the funds you’ve added to your prepaid card if it’s lost or stolen. Cards that offer zero liability protection make it easy to replace the card and value on it so long as it’s registered with the issuer, so look for that benefit when making your selection as well.

Best Practices for Using Debit Cards

Once you get your new debit card, you will probably want to use it to get the stuff you want. Before doing so, ensure you are ready to follow best practices designed to safeguard you while you shop or bank.

Keep Your Info Safe

Treat your debit card like cash by keeping it secure and always avoiding sharing it with others. Additionally, memorize your PIN and avoid writing it down or sharing it with anyone. Be cautious when entering your PIN at ATMs or point-of-sale terminals to prevent others from observing it.

You should also regularly monitor your account for fraudulent activity. Keep a close eye on your account activity by reviewing your statements or accessing your account online. Report any suspicious or unauthorized transactions to your bank immediately.

Stay vigilant against phishing attempts, which are fraudulent messages or calls that appear to be from your bank or a trusted source. Be cautious about sharing personal or financial information via email, phone, or other electronic channels, such as your card number or PIN. Remember, your bank will never ask for your PIN or additional sensitive information via email or phone. If you receive such a request, it is likely a scam.

Maintain accurate contact details with your bank, including your current phone number and email address. This will ensure you receive important notifications and alerts regarding your debit card transactions. Also, familiarize yourself with the security measures provided by your bank, such as two-factor authentication, secure online banking portals, and real-time fraud monitoring systems. Utilize these features to enhance the security of your debit card transactions.

Spend Wisely

Staying safe with a debit card is about more than fraud or theft. You also need to be wary of financial hardships through overspending or other unwise behaviors. Some banks offer the option to set spending limits on your debit card, which can help you stay within your budget and minimize the risk of fraudulent transactions. Contact your bank to inquire about this feature and set appropriate limits.

You should also be aware of your account’s overdraft policy and maintain a sufficient balance to avoid incurring overdraft fees. Some banks offer overdraft protection services, such as linking your debit card to a savings account or a line of credit, which can help prevent overdrafts.

Familiarize yourself with any foreign transaction fees or currency conversion charges associated with your debit card. Consider using an alternative payment method abroad, such as the local currency or traveler’s cheques.

Tips for Using a Debit Card Responsibly

While debit cards offer convenience and security, using them responsibly is important. Here are a few tips to help you make the most of your debit card:

• Keep track of your transactions: Regularly review your bank statements or use online banking to monitor debit card transactions. This will help you identify any unauthorized charges or errors.
• Set up alerts: Many banks provide the option to set up alerts for debit card transactions. You can receive notifications via email or text message whenever a transaction is made, helping you stay informed about your account activity.
• Protect your PIN: Never share your PIN with anyone, and avoid using obvious numbers (such as your birthdate) that can be easily guessed. Memorize your PIN instead of writing it down and cover the keypad when entering your PIN at ATMs or point-of-sale terminals.
• Be cautious with online transactions: When making online purchases, ensure that you are on a secure website that encrypts your payment information. Look for the padlock symbol in the browser address bar to confirm the website’s security.

Conclusion

Debit cards offer a convenient and secure way to manage personal finances, providing direct access to funds without the risk of debt. Understanding the differences between debit cards and credit cards and implementing best practices for usage will empower you to make informed financial decisions. By considering your needs and conducting thorough research, you can select the debit card that best suits your requirements and enhances your banking experience.