How Do Prepaid Debit Cards Work? What You Need to Know
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. The most common type of prepaid cards is a prepaid debit card (which acts like making bank account withdrawals when purchasing goods and services).
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. - 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.
What are the Advantages of a Prepaid Card?
A prepaid card is often as good as cash, though sometimes even better, such as when: - You don’t want to carry cash around; prepaid cards offer certain consumer protections about theft and misappropriation of assets, which cash simply cannot - Prepaid debit cards can be used to make online purchases
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.
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