Should you use a 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).

3 ways millennials can benefit from prepaid debit cards

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.


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.

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.


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.