Prepaid cards allow you to make purchases and withdraw cash at an ATM. But are they the right option for you? Our guide to prepaid debit cards provides a breakdown of the benefits, cons and fees, so you can learn the limits and how to compare your options.
The best prepaid cards of 2020
The best prepaid debit cards enable you to manage your money with ease — without charging hefty fees in the process. We researched over 30 prepaid cards and considered key factors such as monthly fees, availability, account features and how easy it is to access your money to bring you the best cards.
For 2020, we were going to put the Green Dot 5% Cash Back Visa Debit Card on our list for the best rewards prepaid card. But we chose the American Express Serve Cash Back card instead because there isn’t a limit on how much cash back you can earn. Even though Green Dot earns 4% more cash back than American Express, your rewards get capped at $100 a year.
Greenlight gives you control over your child's spending. You can set spending limits for specific stores and even limits on how much they can spend each month. The monthly fee is pretty average compared to most kids' cards, but the control features it comes with outweigh the cost.
High card balance. You can keep up to $10,000 in your parent account and up to $5,000 in your child's account. This balance is higher than most kids' cards offer.
Spending control. Greenlight offers parental control features that let you set spending limits for your child and designate money for specific stores.
Parent-paid interest. While Greenlight doesn't offer an APY, parents can set up interest that's paid through their account.
$4.99 monthly fee. It isn't the lowest fee, but it's average compared to most prepaid cards for kids. This is also a flat fee no matter how many kids you have in the account.
Limited direct deposit. If your teen has a job, they can receive direct deposits. But they can't get payments from Apple, PayPal, Venmo or the US government.
American Express has three different Serve prepaid debit cards. But the Serve Cash Back debit card rewards you with free cash when you use your card for everyday purchases.
Cashback rewards. You'll earn unlimited 1% cash back on all prepaid debit card purchases.
Early direct deposits. You could receive your paycheck up to two days earlier than your coworkers.
Large ATM network. Withdraw money for free at over 32,000 MoneyPass ATMs nationwide.
High foreign transaction fees. You'll pay a 2.7% fee each time you use your card overseas.
Not accepted everywhere. American Express isn't as widely accepted as Visa and Mastercard, so don't be surprised if some businesses won't take your card.
Additional Cardholder Fee
Card replacement fee
Compare prepaid cards
Use this table to compare prepaid debit cards by ATM withdrawal fee, monthly fee and features. Want to compare your top choices side-by-side? Click the “Compare” box next to each for an alternative view.
Prepaid cards come in all shapes and sizes. Here’s an overview of common ones you may find:
Type of card
How to purchase
Prepaid debit card
Anyone who can’t get a bank account, needs help budgeting or has poor credit
Payment networks — Visa, Mastercard, American Express
Many — varies by provider
Prepaid gift card
Anyone who wants an alternative way to gift cash
One-time purchase fee
Prepaid travel card
Payment networks — Visa, Mastercard, American Express
Many — varies by provider
Prepaid business card
Small business owners who don’t qualify for a business credit card
Payment networks — Visa, Mastercard, American Express
Many — varies by provider
How to compare prepaid cards
Here are some factors you should consider when you’re comparing and looking for the best prepaid debit card for you:
Features. Some come with the same basic features offered by checking accounts. Some offer online bill pay, mobile check deposit or direct deposit features, for example.
Cost. Prepaid debit cards are notorious for high fees and it’s rare that you’ll find one without any fees. But some will allow you to waive the monthly fee if you set up a direct deposit or make a certain number of transactions on the card each month.
Ease of loading. Look for a card with easy reloading features for your needs. For example, if your job pays via direct deposit, look for a card that allows free direct deposits. If you handle a lot of cash, look for one with convenient cash reloading options.
Easy withdrawals. Prepaid cards typically come with the ability to withdraw cash from an ATM, but this isn’t a free service. Look for a prepaid card with a large network of ATMs to increase the range of withdrawal options available to you.
Card limits. Most cards have daily withdrawal and deposit limits for cash reloads, ATM withdrawals, purchases and more. Examine the limits for each card you’re considering to make sure they fit with your regular habits.
Who are prepaid cards best for?
Prepaid debit cards could be a good choice if you:
Have no credit or bad credit. You can get a prepaid card without a credit check, so they’re a good option if you don’t qualify for a traditional bank account or credit card. They won’t help you improve your credit score, but they’ll give you a way to pay bills and make purchases online.
Want to avoid overdraft fees. Overdraft fees cost around $25 per transaction on average. If you regularly dip below your account balance and want to avoid costly overdraft fees, a prepaid card is a good solution.
Want to gain control of spending. Knowing you can only spend what’s available on your prepaid card can force you to keep your spending under control. You can also use your card to budget for certain expenses — say $300 for groceries or $500 for gas, for example.
Want to help your child spend money responsibly. You can open a prepaid card for kids or a prepaid card for teens to teach them how to spend money electronically without the risk of getting into financial trouble. You can monitor their spending and load their card with additional funds as needed.
Are traveling and concerned about security. If you’re jet-setting to a place that’s known for debit or credit card fraud, a prepaid card can be a great way to protect your main accounts from potentially harmful activity.
Are expecting a tax refund. Many online tax preparation software companies let you get your tax refund via a prepaid card, which can be a great option if you don’t have a bank account but still want to get your refund direct deposited. H&R Block uses the Emerald Prepaid Mastercard and others use Netspend prepaid card.
Prepaid cards: A quick way to receive your stimulus check
There’s a high probability that a second stimulus check is on its way. Having your payment direct deposited onto your prepaid card could help you get your money up to two days faster than with a traditional bank account.
Prepaid card stats
From 2013 to 2017 prepaid card usage per household in the U.S. increased from 7.9% to 9.2%, according to a recent survey presented by the FDIC. Despite that increase, card usage differs greatly by banking status with 26.9% of unbanked households and 14.5% of underbanked households using prepaid cards, compared to only 6.7% of fully banked households.
The data shows that lower-income households have higher prepaid card usage when compared with higher-income households. Households making less than $15,000 make up 13% of prepaid card users. Compare this to households that make at least $75,000 annually and only represent 8% of prepaid card users.
When looking at the usage of prepaid cards by race, Black households are shown to have the highest prepaid card usage at 13.3%. This is compared to 8.5% of White households, 7.9% of Hispanic households and 7.2% of Asian households.
In some ways, prepaid cards are safer than debit cards. Your bank account information isn’t tied to your prepaid card, so if it gets lost or stolen, you’re only out for the amount you had available on the card. But to make sure all your basis are covered, look for a prepaid card that has these two non-negotiables:
FDIC insurance. The Federal Deposit Insurance Corporation (FDIC) covers bank account deposits up to $250,000, but this doesn’t automatically include prepaid cards. Make sure you choose a card with FDIC insurance so you get your money back if the bank that issues your card fails.
Fraud protection. Not all prepaid cards come with fraud protection, which means you may not get your money back if your card is stolen, you receive a damaged order or there are billing errors. Look for a prepaid card that has fraud protection so you know your money is safe from fraudulent or unauthorized transactions.
What are the pros and cons of prepaid cards?
Prepaid cards offer several potential benefits for consumers, but there are also a few drawbacks:
Bad or no credit accepted. You can get a prepaid card regardless of your credit history. There’s no credit check and having a new card won’t impact your credit score.
No overdraft fees. Banks charge overdraft fees when you make a purchase that exceeds your account balance. But prepaid cards don’t have overdraft fees because you can’t spend more than what you have available.
Pay no interest. Because you can’t carry a balance, you won’t pay expensive interest charges as you would with credit cards.
Great for travel. If you’re traveling internationally, you can load funds onto a prepaid card so you don’t put your debit or credit card at risk of fraud or theft.
Develop good spending habits. Prepaid cards are a great way for kids and teens to “practice” using a traditional card before graduating to the real thing.
Doesn’t build credit. Prepaid cards won’t help build your credit score. See our guide on secured credit cards if you need to rebuild your credit.
High fees. Some prepaid cards have complex fee structures. Look for one with minimal fees. Otherwise, you could end up losing money to unnecessary fees each month.
Declined charges. Any transaction that would put your account in the negative will be declined. To avoid declines at the register, check your balance to confirm you have enough funds to cover your purchase before you swipe.
Not accepted everywhere. Some hotels and car rental agencies don’t accept prepaid cards. Others may require a credit check or additional documentation before allowing you to use a prepaid card.
You could spend hundreds of dollars each year in fees if you’re not careful about how you use your prepaid card. The most common fees include:
Card purchase fee. You’ll pay an initial purchase fee, particularly if you purchase the card from a retail location. Some cards are free when you order online.
Monthly fee. Most prepaid cards charge a monthly fee simply for having the card. You may be able to avoid the fee if you meet certain criteria, like making a certain number of transactions on the card or setting up direct deposits.
Reload fee. Adding money to your prepaid card isn’t free. You’ll typically pay a fee when you add cash to your prepaid card. Electronic deposits and direct deposits may be free.
ATM fee. Some prepaid cards come with a free in-network ATM while others don’t have any in-network machines and charge a fee for every withdrawal.
Balance inquiry fee. You may have to pay if you check your card balance at an ATM. Avoid the fee by checking your balance online or via the mobile app.
Statement fee. If you need to receive a paper statement, you’ll have to pay a fee for the convenience. Monitoring your transactions online is typically free.
You can purchase most prepaid cards online or from major warehouse stores and drug stores like Walmart or CVS. There’s no application process, though you may be able to register your card online to get a card with your name on it and to receive additional features.
But choosing a card in-store at the register may not give you time to digest all the fine print. Shopping online for a prepaid card will give you a chance to check out the fees and terms of each card. While the terms may be confusing, it’s important to read through them so you understand what charges you’ll potentially face with the card and how you can avoid as many fees as possible.
What should I do after I receive my prepaid debit card?
After you purchase your card, make the most of it by following these steps:
Load the card with money. Most cards offer a variety of options for loading funds onto your card. You may be able to: load cash at a participating retailer, transfer funds from another account, deposit a check with your mobile phone, or have your pay direct deposited onto your card.
Make purchases anywhere you’d use a credit or debit card. Making purchases with a prepaid card is as simple as using any other payment card. Swipe your card at the register or enter your card information for online purchases. Some prepaid cards let you pay bills online or transfer funds to another person.
Reload the card once you’ve spent the balance. Each purchase reduces the balance available on your card. Once you’ve spent all the funds you’ve loaded onto the card, you’ll have to reload more. You don’t have to wait until your card is empty to reload, but your card may be subject to a maximum load amount.
What are some prepaid debit card alternatives?
If a prepaid card is not right for you, consider these alternatives:
Checking accounts. While a checking account may come with a monthly fee, you can usually get around it easily by meeting certain deposit or balance requirements. You’ll get an account where you can make direct deposits, plus a debit card to use for your spending needs.
Digital bank accounts. Some digital bank accounts give you the option of having a digital and physical debit card. You’ll have the spending flexibility of a checking account, plus your account may come with budgeting and savings options, to help you grow your money.
Frequently asked questions
Since there is no overdraft coverage with a prepaid card, you will have to do something known as “split tender.” You just need to tell the cashier how much you want to pay on the prepaid card, and pay the rest using another card or cash.
You will have to bring your prepaid card with you and show it to the cashier. The refund will automatically be credited back to your card.
Cassidy Horton is a writer for Finder, specializing in banking and investments. She has a Bachelor of Science in Public Relations and a Master of Business Administration from Georgia Southern University. Cassidy enjoys educating people about financial services, exploring the Pacific Northwest and watching endless reruns of The Office.
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