prepaid debit card

The Best Prepaid Debit Cards

Miranda Marquit — Fri, 05 Oct 2012 10:36:42 +0000

In a world where consumers are increasingly wary of credit even as they want the convenience of plastic, the idea of prepaid debit cards is catching on. Prepaid debit cards (also known as "prepaid credit cards") are branded with the logo of well-known credit companies, and they are accepted where credit cards are used.

What Is a Prepaid Debit Card, and How Does It Work?

A prepaid debit card is not the same as a credit card. It is also not the same as a regular debit card. In some cases, a prepaid card is even used as an alternative to regular checking (and sometimes savings) accounts.

Looks Like a Credit Card...

A prepaid card carries a credit card brand logo (for example Visa or MasterCard), so at the cash register, it acts the same as a credit card. However, a prepaid card is not a credit card. A credit card offers you a line of credit that you can draw on. You borrow every time you use a "regular" credit card. When you use a prepaid debit card, though, you are drawing on money that has already been deposited into the card account. In order to use a prepaid card, there already has to be enough funds.

...Acts Like a Checking or Savings Account

Prepaid cards are also sometimes used as alternatives to bank accounts. Because they work like a credit card or a debit card, it's possible to use them as forms of payment at the store, as well as to pay bills (including online bill pay and automatic withdrawal). You can add money to the card, including having it automatically deposited from your paycheck.

In some cases (but not all), it is also possible to designate some money as "savings" and earn interest on it. A credit card charges you interest; some prepaid debit cards give you a chance to earn interest.

Prepaid cards are very straightforward. You purchase the card, and you "load" a money on it. You designate how much money you want to access with the card, and deposit the money.

How to Put Money on a Prepaid Debit Card

There are different ways to deposit the money on the card:

Purchase the card at a retail store, using cash, credit, or debit. You can purchase a card "preloaded" for a certain amount, or you can specify how much you want on the card at the register.
Buy the card online, using credit or funds transfer, and have it shipped to you.
Direct deposit from your employer or bank onto the prepaid card after it has been purchased. Some prepaid cards allow you to designate direct deposit, allowing you to use the card in a way similar to a bank account.

Once the money is loaded onto the card, you can use the card just as you would a credit card. Additionally, it is often possible to use your prepaid card as a method of bill pay (including online bill pay), as well as withdraw cash from an ATM.

Prepaid Cards Are Not Credit Cards

While a prepaid debit card has the look and feel of a credit card, there cannot be enough emphasis on the fact that a prepaid card is not a credit card. You can't charge more money than you have, so once you have used the money on your card, you need to add more funds if you want the card to keep working.

Additionally, your prepaid card will not impact your credit score in any way, no matter how often you add money to your card.

Pros and Cons of Prepaid Cards

Prepaid cards are not for everyone. Here are some things to consider.

Cons of Prepaid Cards

Prepaid cards have been disparaged quite a bit recently due to the number of fees usually charged by issuers. Even though there are advantages to prepaid cards, including the fact that you get the convenience of plastic without worrying about high interest rates, the fees charged can be a big turn off for many consumers.

One of the most common fees amongst prepaid cards is the monthly maintenance fee. On top of that, many prepaid cards charge you for calling customer service, inquiring about your balance, reloading the card, activating the card, and engaging in other actions. Just using a prepaid card in a way that many consumers consider "normal" can lead to fees. As the fees add up, they erode the actual amount of money you have access to.

Another drawback, at least for those hoping to rebuild their credit, is that prepaid cards don't usually report to the credit bureaus. Because you aren't actually receiving a line of credit, the use of a prepaid card won’t help your credit score. (See out picks for the best secured credit cards)

Pros of Prepaid Cards

The main advantage offered by prepaid cards is it offers the convenience of a credit or debit card but without the risks of overspending or overdrawing. This is a great option for parents as a way to offer financial assistance or for young adults who prefer a simple way to manage a budget.

Another advantage with some cards is that you can earn a yield if there is a savings option. Not all prepaid cards offer a savings option, though. And, among cards that do offer a savings option, not all of them will pay you an interest yield.

What to Look for in a Prepaid Card

One of the first things to look for as you choose a prepaid card is the fee schedule. Pay attention to the number of fees charged and the actions that incur them. Try to find a card that charges minimal fees, or that offers a way to waive certain fees.

Another consideration is the variety of offerings. Think about what you plan to use the prepaid card for:

If you want a way to set aside money, choose a card with a savings option.
If you primarily want to pay bills, find a card that offers you the option of free online bill pay.
If you plan to give the prepaid card to your teen for allowance, focus on a card that is easy to reload regularly — and that doesn't charge a fee each time you load the card.

The Best Prepaid Debit Cards

Here are a few good options when choosing a prepaid card.

Kaiku Visa Prepaid Card

A newcomer to the market, the Kaiku® Visa® Prepaid Card claims some of the lowest fees in the industry. There are no maintenance fees when you direct deposit $750 per month, and no ATM fees if you use one of their 55,000 in-network Allpoint machines. It features mobile check loading with the Kaiku app. Choose from six eye-catching vertical card designs.

Card.com Visa Prepaid Card

The fun thing about Card.com is you can choose from thousands of cool designs. There are no overdraft fees, no late fees, no minimum balance, $0 sign up fee and no credit check. The fees you do have to pay attention to include a $9.95 monthly fee (which is waived if you load at least $1,000 in the prior thirty days via direct deposit), $2.95 ATM or over-the-counter withdrawal fee, and a $0.95 balance inquiry fee. They also have a feature where you can share money with your friends and family through their CARD-2-CARD feature.

Mango Money

Here's a prepaid card for serious savers. The Mango Money prepaid card allows for you to save money, and it offers an APY of up to 6% (best results are for those signed up for direct deposit and have less than $5,000 in their accounts). Even the 2% APY offered for those who don't do direct deposit beats many "high yield" accounts.

There is a monthly fee of $5. However, the fee is waived if you have $800 or more in direct deposits. There are ATM fees, but they aren't out of the ordinary, and you can check your balance online for free. There are no sign up/activation fee, bank transfer/load fee, or customer service fees.

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This article is from Miranda Marquit of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

Suze Orman's Approved Card Gets Mixed Reviews and Controversy

Ashley Jacobs — Fri, 13 Jan 2012 00:12:30 +0000

On Monday, personal finance expert Suze Orman launched her prepaid debit card, The Approved Card From Suze Orman. Suze is putting all her credibility behind this product launch. "I didn't just approve this card," said Suze. "I created it."

Feedback on the card has been mixed and even sparked a Twitter war between Suze and several top personal finance bloggers (more on this below).

Reviewing the Featues

Suze highlighted several features of the card on her website. Below is an analysis of each feature compiled from reviews from various media outlets and personal finance bloggers

The Fees are Competitive

According to Fox Business, compared to other checking account alternatives, The Approved Card offers competitive costs that best other celebrity prepaid cards. Cardholders pay a $3 purchase fee for the card and have to pay a $3 per month maintenance fee (which is waived for the first month). Using the card to make withdrawals from a Non-Allpoint ATM costs cardholders $2 per withdrawal and over the counter withdrawals cost cardholders $2 per transaction. For a list of all fees associated with The Approved Card, take a look at the Fee Schedule.

Suze has faced a lot of backlash due to all the fees associated with her card. As Jeremy Vohwinkle from Generation X Finance reminded his readers, Suze Orman is a personal finance expert who encourages people to get out of debt and avoid excessive fees. Throwing money towards debit card fees means consumers throw less money into eliminating their debt. This fact has raised some objections among personal finance experts and bloggers.

You Get Free TransUnion Credit Scores

For the first year, cardholders get access to their TransUnion Credit Scores for free.

ABC News pointed out that consumers can access their credit reports once a year for free by going to AnnualCreditReport.com. People can also access their credit reports from sites such as Credit Karma.

The Approved Card is Part of The Credit Project

Suze has embraced the idea that activity on debit cards should count towards a person's credit score. Since they aren't currently included in your credit report, Suze has set out on a mission to do that. Your activity on The Approved Card will be reported anonymously to TransUnion in an attempt to help Suze accomplish this goal. The Approved Card is the only card available that is part of this type of project.

Phil Taylor from PT Money highlighted the fact that The Approved Card will have no impact on cardholder's credit scores. He also made it clear that he believes The Credit Project is likely to fail due to the fact that prepaid and debit cards do not demonstrate someone's credit-worthiness.

You Can Establish an Emergency Fund

Cardholders have the ability to set up an emergency fund using their card. This way they can be prepared for unexpected expenses.

SmartMoney believes the emergency fund aspect of the card could be helpful, but also pointed out that there are currently no interest rates associated with the emergency card feature. Interest rates are supposed to be implemented later this year.

You Can Stay Debt Free

Since the card is a prepaid card, provided you are debt free when you get the card, you will not be able to spend more than what is in your account, making sure you don't go into debt.

MSNBC highlighted the fact that The Approved Card is similar to other prepaid cards in regards to keeping people from going into debt. In an interview with MSNBC, Gerri Detweiler from Credit.com made it clear that The Approved Card is "a very typical prepaid card."

The Card is FDIC Insured

Deposits up to $250,000 are insured by the FDIC. Bancorp Bank, the card issuer, is a member of the FDIC.

As MoneyCone pointed out, FDIC insurance is common among most banks. The fact that this card is FDIC insured doesn't really set it apart from other debit cards offered by other banks.

Cardholders get Free Identity Theft Protection from TrustID

Identity theft is a huge issue today but with The Approved Card, cardholders will have access to free identity theft protection through TrustID.

The New York Times highlighted Suze's statement that identity theft protection services tend to be costly. This service adds value to the card if cardholders had originally planned on purchasing identity theft protection.

The Personal Finance Blogger Community Reacts

One of the main responsibilities of personal finance bloggers is to report on product launches such as The Approved Card and give honest feedback.

A few of the top bloggers on the Wise1000 publicized their thoughts on the card and consequently had a run in with Suze Orman on Tuesday evening. (The Wise1000 is Wise Bread's authoritative listing of the top personal finance blogs.)

Here are a few of the highlights from their interactions with Suze:

Many personal finance bloggers were shocked by the dialogue from @SuzeOrmanShow. Phil Taylor of PT Money took the biggest hit in the scuffle. Phil is well-known throughout the personal finance blogging community. He was the organizer behind the personal finance blogging community's first ever Financial Blogger Conference and is in the process of planning FinCon 2012. Phil has been featured on numerous sites including MSNBC, U.S News & World Report, TurboTax, and Fox Business.

Phil's blog is the 26th most respected blog on our chart, and he is the 16th most active member of our blogger community. Here's what Phil had to say about the exchange:

First, regarding Suze: I like her and I respect her for her work. No doubt she's helped millions of people throughout her career. I consider her a teammate in helping people to improve their financial lives. She does it through her classes, books and TV shows. I try to do it through my little blog.

Second, I'm not one of these people who believes in inherently bad financial products. I actually like prepaid debit cards for certain situations. I even promote them on my site. I realize some people are "unbanked" for whatever reason and can't get a regular bank account, thus, the prepaid debit card comes into play. But only as a short-term solution until a bank account can be opened. The goal, in my opinion, should always be to get the unbanked folks off of fee-based products and into the mainstream banking arena.

So my review was never about Suze or prepaid cards in general. My review was about how the card is being marketed. It is being marketed as a long-term solution to the unbanked as well as to the middle class (wanting out of credit card debt and disillusioned by big banks) and to the 99% (who've had it with the fees). This attempt to promote the card amongst the banked is what really fired me up. Additionally, the fees on the card actually make it just on-par with the best prepaid debit cards already on the market. So the card is not exactly revolutionizing the prepaid debit card market for the unbanked.

As I said above, I like Suze, but I was obviously shocked and disappointed that she chose to respond to our tweets and blog post the way she did. She's since apologized, and I accept that.

The community response was awesome. I think the dismissive tone of Suze's tweets really rallied the community. It was as if she was telling us all that our opinions didn't matter. That obviously upset a lot of people.

Briana from 20 and Engaged "was completely disheartened" by the exchange but also felt that the fact that the pf blogger community supported each other during Suze's attack "showed loyalty and true camaraderie." (Briana is the top contributing member in our blogger community.)

As seen above, Suze did apologize for the dialogue. She maintains her own twitter account, so all tweets from @SuzeOrmanShow are written by Suze. Wise Bread reached out to Suze for additional comments on both her card and the Twitter exchange, but she declined to comment further at this time.

What do you think of Suze Orman's Approved Card? Will you sign up for it? And what about the Twitter feud? Share your thoughts with us in the comment section!

This article is from Ashley Jacobs of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

4 Ways to Beat Debit Card Fees

Philip Brewer — Thu, 06 Oct 2011 10:36:22 +0000

Several banks just announced new monthly fees for debit card users. Fortunately, there are plenty ways to avoid them. (See also: That Sneaky Bank Almost Got Me)

Until this month, the large swipe fees they charged merchants made debit cards a huge profit center for banks. They were so profitable, banks were offering all manner of perks if you'd promise to use your debit card at least 5, 7, or 12 times a month.

Those days are gone. As of October 1st, the swipe fee is limited to just 24 cents. That's still plenty of money to make the debit card business profitable for the bank, but it's not going to fund the huge bonuses that bankers have gotten used to. So, they're looking for other sources of money.

Once source they looking at is a monthly fee. Bank of America is going to hit your account with a $5 fee every month that there's even one debit card transaction. Wells Fargo and Chase are testing monthly fees as well.

You don't need to pay those fees. Here are four ways to avoid them.

1. Change Banks

The big money-center banks don't want your piddly little consumer banking business anyway. They make their money from packaging corporate finance deals, selling credit default swaps, and creating collateralized debt obligations. They figure the plain-jane transaction business of debit cards is beneath them (unless there's some serious fee income involved).

Instead of a big money-center bank, consider:

Smaller Banks

The medium-sized regional banks probably aren't much better than the money-center banks — they'd also rather be pocketing a million-dollar fee for arranging a standby letter of credit than handling your checking account. But, as the banks get smaller, they start taking real interest in serving their smaller customers. There are plenty of small, local banks that don't charge a fee for checking accounts, with or without debit cards.

Credit Unions

Credit unions are owned by their members. Serving your financial needs is what they're all about. They're a lot less likely to charge a fee than a bank is.

Brokerage Firms and Other Non-Banks

If you're wealthy or broke, this may be the option for you.

If you're wealthy, get a cash management account at a brokerage fund. They'll issue you a debit card that will give you access to your wealth, and they won't charge a fee for the card. (Big-name brokerage firms charge a hefty fee for the account; discount brokers tend not to.)

If you're broke, get a reloadable debit card. They have fees as well, but the fees are for specific services (like cashing a check, checking your balance, or using an ATM). Many now allow one free ATM withdrawal per month, and most charge no fee to accept direct deposit. If you track your balance yourself (so you don't need to check your balance), you can use them in a way that's practically fee-free.

2. Use a Credit Card

Just about any place that will take a debit card will take a credit card as well. There are a few exceptions, but not many.

Of course, it's easy to get over your head in debt. But that's not the credit card's fault. If you can use a debit card and not spend more than you have in your checking account, you can do exactly the same thing with a credit card. The only difference is you have to do it yourself. This may be the right choice — if you're ready to control your spending without training wheels.

3. Pay Cash

Go totally old school and pay for things with money! Yeah, plenty of people say they spend more if they have cash in their pocket. I say, get over it. You have exactly the same amount of will power and self-control with cash in your wallet as you do with a debit card.

4. Write a Check

Actually, even I don't do this any more. I still pay bills by writing a check (really!), but I can't remember the last time I wrote a check at a store. And yet, it can be done. It used to be done routinely.

This is hardly the end to the possibilities. The transaction business is about to go non-linear. Paying online, or with your cell phone or your mobile device, is already here, and it's just going to get more common.

With all those ways to avoid debit card fees, there's no reason to pay one.

This article is from Philip Brewer of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

Is a Prepaid Debit Card Really Cheaper and Better than a Bank Debit Card?

Xin Lu — Fri, 09 Oct 2009 14:00:02 +0000

A few month ago, my husband received an unsolicited Visa Debit Card from NetSpend and I wrote about it here on Wise Bread. I admit that I did not know much about NetSpend at that time besides that they were sending out unsolicited cards. According to the comments many people received these unwelcomed cards, and some were even sent to to their pets, underaged kids, and ex-husband. What I found interesting was that several commenters defended prepaid debit cards like NetSpend and stated that it was cheaper than getting a bank account. In response to these comments, I decided to look into the fees and services of prepaid debit cards.

First of all, I looked at the NetSpend fee schedule. There seems to be two types of customers: Pay-As-You-Go and Fee Advantage customers. The Pay-As-You-Go customers have to pay $2.00 for each PIN purchase, and $1.00 for each signature purchase. The Fee Advantage customers have to pay $9.95 as a monthly service fee and both types of customers need to pay $9.95 to get a card. There is also a charge for loading money onto the card determined by the local distributors, and non-internet account balance inquiries cost 50 cents each. Each ATM withdrawal costs $2.50, and each ATM decline costs $1.00. Additionally, if there were no transactions within 90 days then there is an additional $5.95 per month account maintenance fee. Additionally, if you try to close your account you will be charged a fee of $5.95. Similar services like Green Dot also has a full menu of fees. In the case of Green Dot the company continues to assess a monthly charge even after the balance falls below $0.

So how does this compare to a bank account? It is true that there are no overdraft fees on these cards, but as long as you watch your balance carefully you can avoid overdrafts fees on a bank account. Many banks also offer free checking accounts with minimum balance requirements of under $100 with no account maintenance fees. The checking accounts usually come with a debit card that can be used at the bank's ATMs and many stores without a fee for every single swipe. Also, debit cards associated with checking and savings accounts have much better fraud protection than prepaid debit cards. Usually credit cards and debit cards associated with deposit accounts limit your liability in case of fraud and the money you deposit in any FDIC member bank would be insured. However, prepaid debit cards do not seem to have that protection so you may be on the hook for any fraudulent activity. Finally, I think it is ridiculous that many of these prepaid cards charge people for loading money onto the card. I have never had a bank account that charged me for depositing money.

I think the main issue with these prepaid cards right now is that they are much less regulated than bank accounts and credit cards. This lack of regulation allows them to send out unsolicited cards, and also nickel and dime those who are unable to get a regular bank account or credit card. The potential for fraud is also very high since anyone can get one of these cards very easily due to the way they are being distributed. I understand that these cards may be the only choice for those out there who cannot get a regular bank account or credit card, but it really seems that the industry is taking advantage of those who need every bit of their cash by assessing all of these fees. If you do have one of these prepaid cards that charges for every little thing you do, make sure that you avoid as many fees as you can by minimizing the number of transactions you make and also meet any deposit requirements. It is also possible to shop around for the company that has the least fees.

For further reading about a variety of prepaid card fees and problems the New York Times just published this a great article titled Prepaid, but Not Prepared for Debit Card Fees. Do you have one of these cards? How do you minimize the fees? Do you believe that they are better than bank accounts?

This article is from Xin Lu of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread: