It wasn’t long ago that prepaid credit cards were viewed as an expensive alternative for those who couldn’t get a credit card or open a bank account. A lot has happened over the past few years to change this perception. In fact, today, prepaid credit cards come with many advantages you won’t find with credit cards or banks.
Some of the key benefits can be found in what prepaid cards don’t come with: interest charges, over the limit penalties, late payment penalties, or overdraft fees. But as the prepaid card market has grown, cards have added more advantages that many people don’t know about. Here are 7 of the more significant perks you can get with a prepaid card:
- Low Fees: While prepaid cards at one time were very expenses, today you can find several free prepaid credit cards. These cards come with no activation fee, no transaction fee, and even no monthly fee in some cases. The key is to understand how you will use the card and to avoid costly mistakes. For example, will you make a lot of ATM withdrawals, or will you mostly use the card at retail locations? Knowing the difference up front can help you pick a card that offers low fees for the types of transactions you plan to make.
- Rewards: While rewards use to be tied only travel or some of the best cash back credit cards, today several prepaid and debit cards offer various rewards. The PerkStreet debit card, for example, offers up to 5% cash back. And several prepaid cards offer bonuses if you load the card with direct deposit.
- High Interest Savings Accounts: Oddly enough, the best high interest savings accounts come from prepaid cards, not banks. For example, the Mango prepaid MasterCard offers an FDIC insured savings account that currently pays 5.1%, well above anything you could get from a bank. Netspend, another popular prepaid card also comes with a high interest account option. There are some limitations. For example, there is a limit on how much you can deposit and you must sign up for direct deposit. But the interest rate is exceptional.
- Free ATM Withdrawals: While most prepaid cards do charge for ATM withdrawals, both the Green Dot and NetSpend prepaid cards have a large network of ATMs where you can withdrawal cash from your card for free. It’s generally better to simply get extra cash back from a retailer when you make a purchase, because they don’t charge fees. But if you plan to use the ATM to get cash frequently, make sure to get a card with no ATM Fees.
- Online Bill Pay: Several cards offer online bill pay, much like you’d see from an online bank. Perhaps the best known offer comes from AccountNow, which offers the service for free. The Rushcard also offers online bill pay, but for a small fee. With these cards, many people manage their money very effectively without a bank account. And if you are part of the Chexsystems and can’t qualify for a checking account, these prepaid cards are a convenient, low cost alternative.
- Check Writing: For those cards that offer online bill pay, you can also have them write a check for you to pay bills to creditors who do not accept online payments. You simply enter the information online with the prepaid card company, and they do the rest.
- Direct Deposit: Finally, almost all prepaid cards offer direct deposit of paychecks and government benefit checks. With direct deposit, you don’t have to pay for expensive check cashing services, and you get access to your money immediately.