Most of us know what a debit card is. These cards are connected to our bank accounts, and they enable us to pay for goods and services.
However, not everyone knows what a prepaid debit card is. If you’re interested in learning more about these handy cards, this guide is for you. Let’s check out everything you need to know about these types of debit cards.
How Prepaid Debit Cards Work
Prepaid debit cards work similarly to standard bank debit cards, except that they are reloaded with a set amount of money at the beginning of the month. You don’t have to have a bank account in order to have a prepaid debit card.
To use a prepaid debit card, all you have to do is enter your card information or swipe your card at the checkout. The POS system will charge your prepaid card in the same way that it would a normal debit card.
With prepaid debit cards, the funds will slowly leave your card. When you no longer have enough funds on your card to make a purchase, you’ll need to reload it.
Generally, you can do so on the prepaid debit card’s manufacturer website. You can also sometimes go into banks or use ATMs or convenience stores to top up your prepaid debit card.
Another handy feature of prepaid debit cards is that you can set them up for a direct deposit. That way, whenever you get paid, your money will automatically get loaded onto your card so that you can start using it again.
What’s the Difference Between a Prepaid Debit Card and a Bank Account?
Okay, so you know what makes prepaid debit cards tick. But, aren’t they the same as a bank account?
T0he answer is: no. Prepaid debit cards, although similar in some ways to bank accounts, work slightly differently. Let’s check out some of the differences between prepaid debit cards and bank accounts.
Fees
In general, bank accounts offer you their services, but charge you fees. These could be minimum balance fees, overdraft fees, and late fees.
Unlike bank accounts, prepaid debit cards don’t charge you any of these fees. That can save you quite a bit of money in the long run.
Overdraft Protection
When you take out a card with a big bank, you get overdraft protection. That means that the bank will cover your purchase even if you don’t have enough money in your account to pay for something.
While prepaid debit cards don’t offer these services, they also help you stop spending money you don’t have. And, they save you the huge fees banks charge for when you do overdraw your bank.
Fraudulent Purchases
When you open a bank account, you’re usually protected in the event that someone steals your card. That can be a huge source of comfort for protecting your assets.
On the other hand, prepaid debit cards don’t necessarily offer these protections. Some do, but you’ll need to check with the card provider to see if that’s the case or not.
Features and Benefits of Prepaid Debit Cards
Your prepaid debit cards provide you with tons of different features and benefits. Let’s take a look at a few of those and get a clearer picture of what makes these cards so great:
- You Can Check Your Balance Digitally: If you want to keep track of your balance, you can easily do so online. That way you can have a clear idea of when to top up your prepaid debit card with more funds.
- You Can Accept Direct Deposits: If you don’t have a traditional bank account, you can receive your employer’s direct deposits through your prepaid card. You can also use your prepaid card to accept tax refunds.
- You Can Send and Receive Money: Prepaid debit cards let you send money instantly to friends and family with the same card network. That makes it easier than ever to pay your friend back for your latte on the way to work.
- There Are No Minimum Balance Requirements: Many banks and financial institutions require you to have a minimum balance. Otherwise, they charge a fee. With prepaid debit cards, you can store as much or as little money on the card as you like.
- You Can Use Prepaid Cards from Major Banking Networks: Visa and MasterCard bank networks offer prepaid cards. That means that you can use your prepaid card anywhere those banks are accepted without worrying whether your transaction will go through or not.
All these features and benefits make prepaid debit cards a popular choice. They’re a great option for anyone who doesn’t have (or doesn’t want to have) a bank account.
