Prepaid Card Basics & Advices

Prepaid card is a type of money card that has money loaded on it. This page will tell you more about what prepaid is, the different kinds of prepaid cards available and our advices.

Overview

Prepaid cards are sometimes called “stored-value” cards because you pay upfront to “load them up” before you use them. Prepaid cards can be used in stores, on-line, at automated banking machines (ABMs) and at any location where the same brand of credit card is accepted. prepaid cards are not credit cards, but they can often be used in the same way.

Issuers

Prepaid cards are offered at a variety of places such as

• banks,
• cheque-cashing outlets,
• stores, and
• financial institutions.

Types

There are several kinds of prepaid
cards:

• multi-purpose cards,
• non-reloadable cards,
• travel cards, and
• payroll cards.

Fees

There are fees for all of these prepaid cards, which means it will cost you money to spend money.

Types of Prepaid Cards

Multi-purpose prepaid cards

The multi-purpose prepaid card is reloadable, meaning you can add more money to this type of card and keep on using it. These cards are currently offered under the MasterCard and Visa brand and can be used anywhere that MasterCard and Visa credit cards are accepted.

Non-reloadable prepaid cards

Non-reloadable prepaid cards are currently offered under the Visa brand as “gift cards” and can be used anywhere that Visa credit cards are accepted.

These cards have fewer fees than multi-purpose prepaid cards, but they don’t offer as much flexibility, since they have a lower maximum value, and cannot be used to withdraw money at an ABM.

Although the cost to sign up for a gift card can be less than for other prepaid cards, gift cards aren’t reloadable, which means you can only use them until you have used up all of the money that is on them.

Prepaid travel cards

All Visa and MasterCard prepaid cards can be used outside of the nation , even if they are not specifically marketed as “travel cards”. Certain prepaid cards are marketed as “travel cards” and will allow you to store large amounts of money—as much as $9,000— on them.

You can use these cards instead of traveler cheques, if you wish. “Travel cards” are currently offered under the Visa brand and can be used anywhere that Visa credit cards are accepted.

Payroll cards

Payroll cards are a new product that some employers and organizations are using to replace paper cheques for paying salaries, benefits or expenses. The payroll cards that are currently being offered under the MasterCard brand are reloadable and can be used at ABMs and anywhere that MasterCard credit cards are accepted.

The issuer and the employer or organization set the terms and conditions of these cards.

Payroll cards are only available to employers and organizations and cannot be purchased by individual consumers. Employers, organizations or cardholders may have to pay fees to use these cards.

Advantages of Prepaid Cards

No credit required

If you need a credit card but are not able—or do not want—to get one, a prepaid card can be useful. Even if you have had credit problems, you can get a prepaid card without having to supply credit information.

No bank account required

You also don’t need to have a bank account to obtain a prepaid card. All you need is proper identification and enough cash to cover the dollar amount you want on the card.

Pay now, spend later

With a prepaid card, you pay now—to buy or “load up” the card—and spend later—when you make your purchase. The amount of money you can spend with the card depends on how much money you have to put on it, and how much money the card issuer will allow you to load onto the card.

Other benefits

• If you don’t have a credit card and want to rent a car, buy a plane ticket or purchase something on-line or by phone, a prepaid card can be useful.
• You can also give a prepaid card as a gift, or as an allowance for a child. In some cases, the child must be 16 years of age or older to use the card.
• A prepaid card can also be handy if you don’t have a bank account or don’t want to carry cash because of concerns about personal safety.
• MasterCard and Visa branded prepaid cards have zero liability protection, which means that you may not have to pay for fraudulent purchases made with your card.
• prepaid cards combine the convenience of a credit card with control over how much money you spend.

Swipe and sign

Paying with a prepaid card works like paying with a credit card. The clerk will ask you to sign a receipt.

Using a PIN

With some prepaid cards, it's safer because you can use a PIN (personal identification number). You would enter the PIN to withdraw cash at an ABM.

Prepaid Card Security

PIN

• Memorize your PIN; don’t write it down.
• When selecting your PIN, avoid choosing obvious numbers—such as your birthdate, your address or part of your phone number.
• To minimize the risk of theft, it is important to protect your PIN. Do not share it with anyone, and make sure you cover the PIN pad when you are entering your number.

ABM security

• Always do your banking when and where you feel most secure.
• If you are uncomfortable about using a banking machine for any reason, go to another location.

What happens if your card is lost or stolen?

One of the advantages of using a prepaid card is that, if your card is lost or stolen, you may not have to pay for the fraudulent purchases that were made with your card.

All MasterCard and Visa prepaid cards and credit cards have zero-liability protection. With zero-liability protection, you are not held responsible for any fraudulent point-of-sale purchases made with your MasterCard or Visa prepaid card.

However, if the illegal use of your card involved using your personal identification number, or PIN, at an ABM, you may not get your money back.

Our Advices

Prepaid card can be very costly to maintained. Choose it wisely.

The first thing to read about a prepaid card offer is not the greatest features it has, but the list of fees. Often I get excited seeing a prepaid card being offer with ease, but when I look at the costs, I was not surprised seeing I could be paying few hundreds of dollars per month if I use it.

Choose the biggest brand like VISA and MasterCard only. Don't make mistake getting a cheap prepaid then later on find out it's nearly impossible to get your money.

Lastly but not least, read more specific advices about the card you like before you commit in purchasing any prepaid card.

For more general information about prepaid card, click here.