What To Know
How do prepaid cards work?
Prepaid cards work like debit cards. But you do not need a bank account to get a prepaid card. Here is how a prepaid card works:
- You get a card from a store or company.
- Sometimes, you buy a card in a certain amount. You might pay $50.00 for a card. That means you can use that card to spend $50.00.
- Sometimes, you buy a card and then add money to it.
- You can use the card to buy things in stores. You also can get cash from an ATM.
- Your card stops working when you spend all the money you added.
- You can add more money.
Unlike most debit cards, many prepaid cards charge very high fees.
What kind of fees do prepaid cards charge?
You might have to pay fees to:
- buy a card
- add more money to a card
- buy something with the card
- find out what your balance is, or how much money you have left on the card
- use an ATM with your card
Sometimes there is a fee every month just to have the card.
For Example
- I put $200 on my card.
- I paid these fees:
$10 to activate the card
$12 for monthly maintenance
$3 every time I bought something
$6 to check my balance
$3 to get cash from an ATM
$4 to get my statement in the mail
$2 to talk to customer support
$3 to reload the card - I paid $43 in fees. Now I have $157 to buy things with.
Why are prepaid cards popular?
Prepaid cards can be convenient for people who do not carry cash. Prepaid cards also are easy to get.
The businesses that sell prepaid cards advertise them. That means you might hear about them.
Some businesses use celebrities to advertise their cards. Some businesses also say that prepaid cards are good for people who do not have a bank account. The businesses might say prepaid cards are a good way to manage your money.
Do prepaid cards help my credit history?
Most prepaid cards do not help you build a credit history. Your credit history describes how you use money. Businesses look at your credit history before they give you a loan, a credit card, or sometimes a job.
Learn more about your credit history.
What is the difference between a prepaid card and a secured credit card?
With a prepaid card:
- I can just buy one
- I pay very high fees
- My money earns no interest
- It does not help my credit history
With a secured credit card:
- I have to apply for one
- I pay some fees, usually lower
- My money might earn interest
- It can help my credit history
Learn more about secured credit cards.
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