How Do Prepaid Debit Cards Work?

A prepaid card acts much the way a gift card would in that they allow you to spend money wherever accepted up to the amount stored on the card. After depleting the balance, you can reload the card online, through an ATM, network store or other means specified by the prepaid card.

What is a Prepaid Card?

A prepaid card is a type of payment card that can be loaded with money in advance and then used to purchase goods or services without incurring debt from the issuer.

How Do Prepaid Cards Work?

ATM access: Some prepaid cards only allow in-network ATM withdrawals for free, meaning at the issuing bank or financial institution’s branch network.

Reload options: A prepaid card generally allows you to add money to your balance in multiple ways. 

Card limits: Many cards will either restrict how much you can withdraw from an ATM, spend or reload per day.

How Do Prepaid Cards Work?

Consumer protections: One major advantage to a prepaid card over cash is the liability and fraud protection you have from federal law. 

Fees: One theme all of these cards have in common are fees. 

Expiration dates: Like a credit card, a prepaid card has an expiration date. 

What are the Advantages of a Prepaid Card?

Prepaid cards work best for the unbanked or those looking for a better budgeting system for themselves. These can be a welcome alternative to credit cards with the potential to fall behind on payments and get hit with costly interest.

What are the Disadvantages of a Prepaid Card?

The largest downside to prepaid debit cards comes from the assortment of fees which can erode your cash balance quickly.

Common Fees for Prepaid Cards

Monthly fee

Transaction fee

In-Network / Out-of-Network ATM Fees

Balance Inquiry Fee

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