- June 03, 2019
- |Did you Know
1. Prepaid cards are more like debit than credit. Prepaid cards look like credit cards and spend like credit cards but there’s no credit behind them. They are technically debit cards– when you use them, you’re spending your own money, not the bank’s.
Unlike traditional debit cards, however, you don’t need a bank account to use a prepaid card. You just load dollars directly onto the card and then use that balance for purchases. When the balance on the card dips too low, you reload more money.
Because prepaid cards are associated with major card networks – Visa, MasterCard, American Express and Discover – they can be used anywhere debit cards can: to buy groceries, gas up your car, even pay bills online. And because the fees merchants pay to accept debit cards (including prepaid debit cards) are lower than those for credit cards, there may be places that will accept your prepaid card, but not credit cards.
2. Prepaid cards are an alternative to banks. For the nearly 68 million people in the U.S. without a checking account, prepaid cards offer the ease of card-based purchases without the hassles of dealing with a bank. You can use prepaid cards to book a hotel room or rent a car. With Pinnacle Debit Card, you even come with account and routing numbers, which means you can have your paycheck direct-deposited onto your card.
3. No credit is required – or built. Prepaid cards were originally designed for people with poor or nonexistent credit history, and remain an excellent option for those with credit issues. It’s impossible to spend beyond your means with a prepaid card – the card expires when the preloaded dollars run out – which makes it a useful first card for teens or those recovering from debt.
4. Shop around. "The prepaid industry has expanded in recent years and with increased competition, consumers have far more options," says a Consumer Financial Protection Bureau representative. These include prepaid cards with benefits aimed at specific lifestyles. Expect to see more incentives such as Pinnacle cash-back rewards for non-profit organizations.
5. Prepaid cards can help you manage your money. Even for people with a regular bank account, a prepaid card can be an effective budgeting tool. Load your monthly grocery budget onto a prepaid card and use it strictly at the supermarket; when the money’s gone, your spending stops automatically. "The ability to have options is paramount for all consumers using prepaid cards giving them a peace of mind and more educational awareness in the 21st century," said Bobby Meadows, Executive Director of the ManageOurCard, in a February 2019 speech.
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