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A Beginner’s Guide To Prepaid Cards

[Tuesday, August 9th, 2016]

Question: When is a credit card not a credit card?
Answer: When it’s a prepaid card.

Do you know the ins and outs of prepaid cards? If not – if, perhaps, you aren’t even entirely sure what a prepaid card is – then this article will tell you all you need to know. Read on to find out about some of the hottest and most popular cards out there: cards that look like a credit card and act like a credit card, but aren’t credit cards.

Prepaid cards, as I said, look just like credit cards. Visa, American Express, or MasterCard may issue them. And you use them like credit cards, by sliding them, tapping them, or inserting them into card readers. The difference is, with a credit card, you have to pay back the money that you spent later on, after you bring home your purchase. With a prepaid card, you’ve already spent the money, so you don’t owe anything after you make that purchase.

Here’s how it works: you decide how much you’d like to be able to spend using your prepaid card. It could be $10, or $1,000. You load that money onto the card, and then you spend it. In that sense, it works a lot like a debit card, only instead of taking money from your checking account, it takes it from your prepaid card account. Once the money is gone, you can’t buy anything else until you load more money onto the card. You can do this by transferring money from your bank account, receiving a direct deposit onto the card, or loading cash onto the card at a register where your particular brand of card can be reloaded.

Oh, here’s another thing about prepaid cards: you can get one no matter what your credit score is like. So if your credit is nonexistent or bad, but you need a card that functions like a credit card, a prepaid card may be the answer for you. The downside to this is that a prepaid card won’t help you mend your credit or establish credit in any way. Since it is not technically a credit card, nothing is reported to the credit bureaus. So it’s a net-zero effect.

Another great thing about prepaid cards is that you can use one in place of a traditional bank account. Since you can set up direct deposits and bill payment on them, it’s easy to just replace your bank with a prepaid card, if you so desire. More and more people are doing this now when they become disgruntled with the fees charged by their banks. You can get cash from an ATM, pay for purchases online or in stores, pay bills, and get paid: what more do you need?

One more good use for a prepaid card is to use it for your teenager, as an allowance and a financial education tool. Once your child is 13 years old, he or she can get a prepaid card on a family account with you. You can load money onto it and track exactly what is spent, and where. You can also take money off of it, if you decide to revoke some allowance for irresponsible behavior on your child’s part. Very handy!

Prepaid cards are easy to use and have many great features – and they are becoming more and more popular. Want to try one? Apply today.

See also

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Q: Why Prepaid Cards Are The Hottest Financial Trend Going

Prepaid cards are suddenly everywhere, it seems. Teenagers have them, college kids have them, parents have them, and even grandparents are using them.

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Q: The 4 Types of Cards Most People Carry

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Q: Prepaid Cards: A Guide to the Different Types

When it comes to prepaid cards, it’s not unusual to get a little confused as to the different types out there. Prepaid cards are more popular than ever and no two are exactly the same.

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Q: 5 Things You Can Do With a Prepaid Card

Prepaid cards are increasing in popularity, with more and more people becoming wise to the benefits of using cards instead of cash. But even if you’re already a pro at using prepaid cards, you may not know all the things you can do with it.

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