What is a Prepaid Card? | How to Use Prepaid Cards Online
Prepaid cards can be a great alternative to debit and credit cards. You can use them to make purchases, pay bills, or get cash from ATMs. Better yet, you can easily reload a prepaid card as needed. Let’s take a closer look at what prepaid cards are, how they work, their benefits, and how to use one online so you can decide if a prepaid card is right for you.
What is a prepaid card?
Sold at retailers, banks, credit card companies, and other financial institutions, prepaid cards are cards that require you to load money onto them. While you can specify how much you want on a card, there might be daily, weekly, or total limits. Once you’ve used up the balance on your card, you’ll need to reload it to make more purchases, cover your bills, or withdraw cash again.
How prepaid cards work
Not all prepaid cards are created equal, but many of them offer a variety of reload options and give you access to ATMs so you can take out cash. In many cases, prepaid cards also come with fees for activating them, making deposits, and using out-of-network ATMs. In addition, they tend to have expiration dates and might restrict how much you can reload, withdraw, or spend during a certain time period.
Prepaid cards vs. debit cards vs. credit cards
There are several differences between prepaid cards, debit cards, and credit cards. With a prepaid card, you’ll load money via direct deposit, cash, check, or money transfer before you make purchases. A debit card requires you to use money directly from your checking account every time you make a purchase or withdraw cash from an ATM. On the flip side, a credit card allows you to borrow money for purchases and repay it later.
Do prepaid cards affect your credit score?
Since a prepaid card doesn’t involve borrowing money, your activity won’t be reported to the credit reporting agencies. Therefore, prepaid cards don’t impact your credit score. If your goal is to build or improve your credit, you may be better off with a traditional credit card or secured credit card.
Benefits of prepaid cards
There are several noteworthy benefits of prepaid cards, such as:
Manage your budget
A prepaid card can make it easier for you to stick to your budget. Since you control how much money is on your card, you’ll be less likely to overspend. You may use a prepaid card to budget for various expenses including rent, groceries, and entertainment.
Add money as needed
With a prepaid card, you have the flexibility to add as much or as little money as you want. This is great news if your expenses fluctuate or you’re unsure of exactly how much you’ll need each month.
No credit check required
You can get a prepaid card without a credit check. Even if you don't have great credit, you’ll still be able to use one to make purchases, pay for bills, and withdraw cash. Prepaid cards can be easier to qualify for than credit cards.
Safe and easy online bill payments
If you like to pay bills like your utilities and internet online, a prepaid card can be a great option that allows for fast, secure payments.
How to use a prepaid card online
To use a prepaid card online, follow these steps:
1. Choose a prepaid card
Since there are countless prepaid cards on the market, shop around to explore all your options. Compare the fees, limitations, and perks of each card so you can make the best choice for your situation.
2. Activate your card online or in store
Once you decide on a prepaid card, activate it online or in store. This process should only take minutes and may require you to enter your card number, security code, and expiration date. You might also have to pay an activation fee.
3. Cover expenses
As soon as you activate your prepaid card, you’re free to make purchases. You can use it to pay for rent, groceries, clothes, or just about any other expense. Depending on your card, you may also withdraw cash.
How to reload a prepaid card
You can reload a prepaid card once you’ve used up your balance. There are several ways you can do so, including:
- Set up a direct deposit.
- Transfer money from a checking account or a different prepaid card.
- Add funds in person at Advance America locations , retail stores or the financial institution that offers the card.
- Purchase a “reload pack” to add a certain amount.
Prepaid cards make spending easy
Not only are prepaid cards safer than cash, but they also reduce the risk of overspending. Plus, they’re easy to use and reload. If you don’t want to use debit or credit cards to make purchases and cover expenses, prepaid cards are a viable alternative you may want to consider.