Perhaps the term ‘prepaid credit card’ is a misnomer, but it is a common one. Many people view prepaid debit cards as credit cards, because they are used so similarly.
The real difference between a credit card and a debit card, of course, is that with the former you are borrowing money and with the latter you are using your own money held within the bank which has issued your card.
A free prepaid debit card is almost a hybrid between the two: it doesn’t have to be issued by your bank, but you must have deposited the funds into the card account in order to be able to use it.
You can withdraw money from an ATM, use the card in stores or to make online purchases, and pay restaurant or even utility bills with it.
Why use free prepaid debit cards?
There are lots of reasons why you might want to open a prepaid card account.
First they are great for budgeting purposes: If you are a little lax with your accounting and find yourself overdrawn every month, then using a prepaid card will stop you from overspending.
A traditional debit card will guarantee spending up to a certain limit on a per sale basis. If this limit on your card is, say, $50, then you could go into 10 stores and spend $50 in each without your card being refused. But you’ll be $500 overdrawn if you didn’t have that money in your account.
When you are spending with a free prepaid card, you can’t go overdrawn. If you max out your spending, your card payment will simply be refused.
This is great if you want to give your card to someone else. How about your child going to college? You can give him, or her, a card to spend your money, knowing that they won’t overspend. It’s a great way of giving but still staying in control, while at the same time teaching your son or daughter about budgeting (often the question “can I have some more money?” is as tough to ask as explaining why your credit card balance is so far out of bounds).
Then there are those people who can’t get a regular banking account, or just don’t want one. Your salary can be paid into your prepaid card account, and you’ll never go overdrawn.
And, of course, if you’re like me, you’ll hate carrying too much cash. It’s not the thought of being mugged that scares me, it’s the idea I might pull out my cash from my pocket and drop a few bills. Carrying a card, and making payments from it, is far more convenient.
Obtaining a prepaid card
Opening an account with a card provider is easy. There’s no credit check, and most providers will clear you and accept your application immediately. Then you simple ‘charge the card up’ by making a deposit, and away you go.
So, there are a lot of benefits of prepaid cards and they are easy to open. Yet some will still charge you. To use your own money! If you’re going to use a prepaid card, make sure you opt for one of the free prepaid debit cards on the market today. Here’s my selection of the best:
There are no bells and whistle attached to this card: it simply does what it says. There are monthly fees, but not if you make 30 purchases or more, or you pay in at least $1,000 to load your card. The online sign up is a simple procedure, and once loaded you can make free withdrawals at ATMs all over the country. There’s also free online bill paying.
You wouldn’t expect the king of cards to be absent from the market, and American Express doesn’t disappoint. No fees. Well, almost. You won’t pay any fees on purchases or other transactions, and there is no monthly membership fee. And even though there is a great 24 hour customer service, you won’t be charged for this, either.
You also have protection on all your purchases made with the card, roadside assistance, and plenty other benefits. The only drawback is that ATM withdrawals will cost you $2. But who need cash, anyway? And there is usually a signing up giveaway: at the time of writing it’s a $10 gift card if you sign up with a $50 deposit.
You are guaranteed to be approved for this card, and there will be no credit check. You don’t even have to make a deposit when you sign up for the card, though there is a $9.95 activation fee to use it.
Any transaction you make where you need to sign is free, and there is access to cash through the ATM network. You can make direct deposits or load cash at over 50,000 locations across the nation, as well as pay your bills online.
The Pink prepaid debit card really is something special. When you sign up, part of the $9.95 fee is paid to breast cancer research charities. And it’s the same with any purchase you make: it’s the card that keeps giving to the National Breast Cancer Foundation.
You can get to your salary or government check a couple of days early, but there are plenty of transaction fees levied: to avoid these, sign up for the $5 per month plan, though you’ll have to deposit $500 each month, too. Cash withdrawals from ATMs are free.
Free prepaid debit cards are a great way of carrying the security of plastic without the temptation. Many give extra benefits, such as purchase insurance and roadside assistance, and others give to worthwhile causes. If you want to make sure your child’s college allowance is not overspent, then this could be a way of doing so.
But be warned, not all prepaid debit cards are free. Do a little research, consider how you spend and what you want from a card, and you’ll find the best one for you – some will even allow you to personalize them with your own photo. A free prepaid card, no fees, and an identity card all in one: available in 30 seconds online, anywhere.