Browse the Best Prepaid Credit Cards

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What is a Prepaid Card?

When you search for information on prepaid cards, “prepaid credit card” is a term that frequently pops up across the internet. This may lead you to wonder, just what is a prepaid credit card and how is it different from a prepaid debit card? The truth is, both of these terms refer to the same type of card, with the latter being a bit more accurate.

When consumers seek out the best prepaid credit cards, what they’re actually looking for is not actually a credit card at all. It’s not quite a debit card either – in fact, it offers an alternative to traditional banking. Unlike credit cards, prepaid cards don’t follow the “pay later” model. Instead, cardholders load them with funds they already have access to in order to make purchases.

Unlike debit cards, these spendable funds don’t necessarily come directly from a bank account. Yet despite their unique model, prepaid cards can be used just about anywhere that accepts credit and debit cards. Since they require funds upfront rather than borrowing from a credit line but don’t require a bank account, they can serve as great budgeting tools.

Secured Credit Card Comparison

Prepaid cards may sound a lot like secured credit cards since both involve a deposit, can help curb debt, and work with just about any merchant. However, this is where the similarities end. First and foremost, one is a credit card, while the other functions more like a reloadable gift card with debit card perks.

Whereas card issuers hold a secured card deposit as collateral for a credit line, the funds loaded onto a prepaid card are meant to be spent. When this money runs out, the cardholder must load more to continue using the card. This means reloadable prepaid cards don’t affect your credit score or even consider your credit history..

In addition, the responsible use of a secured card can lead issuers to refund the deposit and offer credit limit increases. With prepaid cards, the amount loaded onto the card is the maximum the cardholder can spend, and there is certainly no refund.

Debit Card Comparison

Though “best-prepaid debit cards” is another popular search term, these aren’t quite the same as debit cards either. Debit cards come attached to bank accounts – usually checking accounts – and draw funds from there. Meanwhile, prepaid cards only have access to the funds loaded directly onto them.

They‘re not directly connected to a bank account, though one may be linked for the purpose of online transfers. Yet many of the features that come with a debit card and checking account are available with prepaid cards as well, including:

• Online bill pay
• Direct deposit
• ATM access
• Money transfers

How Do Prepaid Cards Work?

To apply for a prepaid card, first you need to choose an issuer. Plenty of financial institutions offer these cards, from Chase to American Express. Some are even cobranded with companies like Walmart,  PayPal, and Starbucks. There’s no credit check involved in the application process, so getting one is as simple as submitting the necessary form, which you can generally do online.

How to Load and Reload Funds

Once you have your prepaid card, you can load your funds onto it in a number of ways. You cannot, however, transfer money from credit card to prepaid card online. If you happen to have a checking account and just want this card as a budgeting tool, you can link the card to your account to make transfers.

Alternately, you can set up direct deposit on your prepaid card. That means you have funds from your paycheck or government benefits loaded directly onto the card each month.

Participating retailers may also be able to reload your card at the register. This can either be done using cash you have on-hand, or with the purchase of a reload pack, such as a MoneyPak. MoneyPaks operate like gift cards, so you purchase them at the register to load them with your cash. Then, you visit the MoneyPak website and input the MoneyPak code along with your prepaid card number to transfer the funds over.

Do Prepaid Cards Charge Fees?

While the fees and interest charges that accompany credit cards don’t apply to prepaid cards, they do incur their own fees. In fact, this is one of their bigger downsides to having a prepaid card. Depending on the card you get you may need to pay a variety of fees, including:

• An activation fee when you purchase the card
• Monthly fees for maintenance
• A fee each time you reload the card
• ATM fees if you need to take cash out of the account

Pros and Cons of Reloadable Prepaid Cards

Prepaid cards can be a great budgeting tool for the right wallet, but there are also a few reasons why these cards aren’t as popular as credit cards and debit cards. They’re most beneficial for people on a fixed income; you won’t ever have to worry about spending more than you’ve allotted for the month or over-drafting on a bank account.

Prepaid cards can also offer a safer alternative to carrying cash around. This is why some parents give these cards to their children in place of a cash allowance. Travelers visiting the United States can also use them in lieu of carrying cash or applying for a U.S. credit card. Some even recommend giving prepaid cards over gift cards, since they allow for more flexibility.   Some prepaid cards also provide free reloads.

However, prepaid cards may also come with certain disadvantages and limitations. Aside from excessive fees, some don’t allow you to use them for car rentals and similar purchases. Though consumers with bad credit can use them, they don’t help rebuild credit like secured cards do.

Find the Best Prepaid Cards

Whether you think a prepaid card could be right for you, or you want to browse for alternatives, the BestCards team has you covered. We’ve reviewed hundreds of offers with an unbiased approach to help you navigate you options. If you need a little more background on all things related to credit cards, check out our additional resources as well. Find your best card now!