Should you use a prepaid Visa card?

Young woman using an ATM and wondering about the prepaid VIsa card Young woman using an ATM and wondering about the prepaid VIsa card Image:

In a Nutshell

Prepaid cards can help get your credit back on track, but you must pay close attention to the pros and cons.

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Curious about prepaid Visa®cards, but aren’t sure of the advantages?

Let’s take a look at what exactly a prepaid Visa® card is, how they work, and why you might want one (along with a few reasons why you may not!).

Prepaid cards are cards that you can load money onto in advance in order to make purchases or transactions. These cards are not linked to any bank accounts.

For the most part, you can only use the prepaid card to spend up to the amount of money you loaded onto it. You can’t charge purchases to the card to pay for them later because they’re not tied to any lines of credit (like a credit card).

If you do try to use a prepaid card to buy something worth more than the card’s balance, your transaction may simply be declined. Some cards will charge you a small fee for an authorization decline, so be sure to read the fine print on any card before you use it.

Fees are one of the major downsides of these cards — but the benefits might be worth it, depending on your situation. Here’s how to tell if a prepaid card could work for you.

3 ways millennials can benefit from prepaid debit cards

Advantages of prepaid cards

Now that you know what a prepaid Visa® card is, you may be wondering why someone might choose this as a payment method over other options. Here are a few benefits:

  • No need for a bank account; you can deposit money straight onto the card either through direct deposit, a “reload” card, or face-to-face at some retail stores or the financial institution that provides the card.
  • No need for a credit check.
  • You can directly deposit your paycheck onto your card for easy spending.
  • You can put your tax refund on your prepaid Visa® card.
  • Certain purchases come with purchase protection from Visa®.
  • You can’t spend more cash than you actually have, because you can only use the balance on the card.

Depending on your unique situation, prepaid Visa® cards can also help you or a family member feel more secure than using a credit card when making purchase online.

Marcion Albert works as an editor and owns NewAwning.com. He explained how his widowed mother never handled her household finances and relied on cash to make purchases after her husband passed.

“My mom just never really learned to deal with credit cards,” said Albert. At one point, Albert’s mother entered her card information into a questionable site. As a result, the family canceled the card and got her a replacement. “That led her to swearing off all internet purchases for years,” he said.

But online shopping remained the most convenient option for some of his mother’s purchases. So the family worked together to come up with a different solution. They helped her choose a prepaid card with a $250 limit.

“It allowed her to make purchases online,” Albert explained, “and if there was a problem she’d only be out the amount left on the card. Since we moved to this solution, we’ve never had an issue, and she feels safe buying online again.”

What to watch out for when using this kind of card from Visa®

Prepaid cards do carry the potential to cause more hassle than convenience.

Anna Renault, an author and cancer survivor who often speaks about her experiences, picked up a prepaid Visa® card before a trip in 2016. She was headed from Maryland to California to keynote a conference that fall.

“I worried about the various hacking issues plaguing the country regarding credit cards,” she shared. “Rather than have my own personal credit card number floating around the airports, the train stations, hotels and restaurants, I decided to get some prepaid Visa® cards before leaving home.”

While Renault felt reassured that she wasn’t risking her personal credit card information during her travels, she ran into several issues with her prepaid cards.

For one, not every place accepted a prepaid Visa® card. And because she used more than one prepaid card, she noted that simply keeping up with all of them — and their balances — became a headache.

Finally, she noted each prepaid Visa® card she used came with a reload fee of a little more than $5 per card. “That started to add up when I thought I’d get several smaller cards rather than one or two big ones,” she said, “so I switched to a couple of larger denomination cards.”

The various fees may be the biggest downside for someone who otherwise would benefit from using a prepaid card. You may be charged fees when you:

  • Use an ATM.
  • Make any purchases (these are transaction fees).
  • Check your balance or reload your card at a retail location.
  • Request a paper statement.
  • Don’t use your card for a certain period of time (known as an inactivity fee).
  • Ask for a replacement card, or request an extra card for another authorized user.
  • Have an insufficient balance to cover your purchase.

Some cards charge a monthly fee just for using the card, although some will waive the fee if you use your card for a certain number of purchases, load a certain amount during the month or use direct deposit to load.

Choosing the right card for you

Understanding the advantages and potential pitfalls of these cards is only the first step. There are a lot of options and trying to narrow down the selection can feel overwhelming.

Make the process easier by comparing cards and finding one that aligns with your needs.

Card

Advantages and features

Some of the card fees

Who is this card good for?

Kaiku® Visa® Prepaid Card

Free access to 55,000 ATMs worldwide

The fees are also manageable; the Kaiku® Visa® Prepaid Card doesn’t charge fees for activation, inactivity or bill payment

$3 monthly fee (waived in any month you load at least $750)

$3 per withdrawal transaction at out-of-network ATMs

This card is great for people who also use other bank accounts or online accounts to hold and transfer money.
Mango Visa© Prepaid Card

Includes online and smartphone app access to manage your accounts

Earn $10 when you refer a new user who enrolls, activates and receives a recurring direct deposit

Includes interest-bearing savings account with up to 6 percent APY on your savings (up to the first $5,000) when you direct deposit at least $800 per month with a minimum balance of $1 at the end of the month

$1 per ATM balance inquiry

$2 per ATM withdrawal

$3 monthly fee

2 percent of your transaction total for international currency conversions at points of sale or ATMs

Great for savers who want access to a high-yield savings account.
Netspend Visa Prepaid Debit Card

No minimum balance required

Ability to reload the card through NetSpend or over 130,000 reload locations nationwide

Pay-As-You-Go Plan: No plan fee. There are additional fees ranging from $1 to $2 per transaction.

FeeAdvantage Plan: $9.95 per month with unlimited free transactions.
Netspend Premier® FeeAdvantage Plan: $5 per month with a direct deposit of $500 or more in payroll or government payments in one year.

Solid option for cardholders who want to closely manage the fees they pay.

Comes with 3 different plans to choose from, so you can get the one that makes the most sense for you.


Bottom line

If you want to try this payment method to see if it works for you, consider where you want to use the card. Is it accepted at stores or sites you frequent? If so, start with a low-denomination balance to try out a prepaid card.

And always read the fine print before using a prepaid card or loading a balance onto one. It’s important to look at the details, terms, fees and conditions before you spend money to activate or use a prepaid Visa® card. Also, be aware of both the benefits and the limitations of the card you choose.


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