best prepaid cards

7 Best Prepaid Cards to Control Your Budget

While traditional credit cards are great consumer products because they reward your spending, the best prepaid cards are useful because they can help you control your budget.

If you are someone who needs to reign in spending or just get a better handle on your budget, then prepaid cards could be a good solution for you.

What is a Prepaid Debit Card?

A prepaid card, or prepaid debit card, is a card issued by a bank or financial institution that you can pre-load funds on to for payment.

Think of them as a gift card that you can spend almost anywhere rather than just at one store.

Compared to Debit Cards

Prepaid debit cards are slightly different than regular debit cards.

Regular debit cards are connected to a checking account and withdraw funds from that bank account every time you make a purchase. With traditional debit cards, you also run the risk of overdrawing your account.

Prepaid debit cards have funds preloaded onto the card, and you typically cannot spend more than what you loaded on the card. There is also no bank account required to open a prepaid debit card.

That offers some protection to the consumer and comes with a cost, usually in the form of a monthly fee.

Compared to Credit Cards

Traditional credit cards (like the Blaze MasterCard) are drastically different than prepaid debit cards for several reasons, including the fact that conventional credit cards offer rewards, perks, and have a bill that you pay off every month.

There are also prepaid credit cards, which are different than prepaid debit cards as well. There are differences between prepaid debt and credit cards, just like there are differences between regular debit and credit cards.

Prepaid credit cards, or secured credit cards, work similar to a regular credit card in that you need to apply, have your credit checked, and get approved for the card. Except, with a prepaid credit card, you need to make a security deposit or upfront payment. That is a form of collateral for the lender in case you cannot pay your card back.

Prepaid credit cards are an excellent tool for building credit, whereas prepaid debit cards are a good tool for budgeting.

7 Best Prepaid Cards to Control Your Budget

American Express Serve FREE Reloads

  • Monthly Fee: $6.95
  • Reload Fee: $0 at 45,000 locations
  • ATM Withdrawals: $0 at MoneyPass ATMs ($2.50 at other ATMs)
  • Rewards: None

The American Express Serve FREE Reloads is one of a few American Express Cards that made the list of the seven best prepaid cards.

This card makes for a great checking account replacement because of its wide range of free reload methods across many retailers. Plus, the card has free ATM withdrawals at MoneyPass ATMs and no purchase fee when you apply online.

However, the $6.95 fee is a hefty one to pay with no rewards or bonuses offered in return.

American Express Serve Cash Back

  • Monthly Fee: $7.95
  • Reload Fee: Up to $3.95
  • ATM Withdrawals: $0 at MoneyPass ATMs ($2.50 at other ATMs)
  • Rewards: Unlimited 1% Cash Back

The second of the American Express cards charges slightly more in fees, but offers 1% cashback rewards in return. This was actually the only card I could find that clearly stated what their rewards program was online.

While 1% cashback is fantastic, keep in mind, you’ll need to spend $10,000 or more per year with this card to offset the $7.95 annual fee. So be sure the math works out in your favor before jumping in.

Bluebird by American Express

  • Monthly Fee: $0
  • Reload Fee: $0 at select retailers
  • ATM Withdrawals: $0 at MoneyPass ATMs ($2.50 at other ATMs)
  • Rewards: None

Bluebird by American Express made the list because it is one of the most affordable prepaid debit cards.

This card does not charge a monthly or annual fee and still offers free reload options and free withdrawals from ATMs. If you are solely looking for a cheap card to help manage your spending, the Bluebird card could be a good fit for you.

Movo Prepaid Virtual Prepaid Visa Card

  • Monthly Fee: $0
  • Reload Fee: $0 through Paypal and select methods
  • ATM Withdrawals: $0 at 6,000 ATMs in Visa Plus Alliance ATM network ($2 at other ATMs)
  • Rewards: None

Movo is another low-cost card on the list, making it an excellent option for helping you to get your budget under control. Plus, they offer no ATM fees at 6,000 ATMs nationwide.

To be honest, though, I struggle to find a reason to use this card over the American Express alternative above it.

Brink’s Prepaid Mastercard

  • Monthly Fee: $9.95
  • Reload Fee: $0 with direct deposit
  • ATM Withdrawals: $2.50
  • Rewards: Potential

The Brink’s Prepaid Mastercard is one of the most expensive cards on the list and offers a unique high yield savings account boasting 5% in interest returns. The website is a little vague in details, but it seems worth exploring.

Additionally, it does seem like there is potential to earn rewards as well. Here is the exact language from their website:

Use your Card in everyday places, and you could earn cashback offers back to your Card Account.

Not clearly stating information on a website where you are trying to sell a product is a pet peeve of mine (and I’m sure others), but this card does show a lot of potential despite the high monthly fee.

NetSpend Prepaid Visa Card

  • Monthly Fee: Up to $9.95
  • Reload Fee: $0 with a mobile check reload
  • ATM Withdrawals: $2.50
  • Rewards: Potential

The NetSpend Prepaid card offers two different payment plans – a monthly one or a pay-as-you-go plan. The monthly plan is what comes in at the hefty $9.95 cost.

Like the Brink’s card, NetSpend claims it will offer personalized rewards, but does not provide many details until you actually apply and receive a card.

FamZoo Prepaid Debit Card

  • Monthly Fee: $5.99
  • Reload Fee: $0 with direct deposit
  • ATM Withdrawals: $0 at MoneyPass ATMs
  • Rewards: None

FamZoo is the ideal card for families who want to start to teach their kids about money and budgeting so that they can grow up to be a fiscally responsible person.

Through FamZoo, you can get four cards (more with an added cost) and allocate a budget to each card. They even offer budgeting tools and incentives to help you teach your kids good habits.

The monthly fee is high, but if it can help teach your kids some financial lessons, it could be worth it.

Prepaid Cards Pros and Cons

Prepaid Cards Pros

Budgeting: Prepaid debit cards allow you to control your spending and budget better. Unlike traditional debit cards and credit cards, it’s much harder to overspend when you are allocating funds to the card before making purchases.

Operates like a Bank: In many cases, a prepaid debit card can replace the need to have a bank account and potentially simplify your finances.

No Credit Check: There is no hard credit check required with prepaid debit cards.

Prepaid Cards Cons

Cost: Most prepaid debit cards have multiple fees associated with them, and these costs can add up. In my opinion, these types of cards should be temporary solutions to help you establish a budget or reign in spending. Over the long term, there are better types of cards out there that will actually reward your spending, rather than charging you money to use them.

Does Not Build Credit: Unlike prepaid or secured credit cards, prepaid debit cards do not build credit. This also means they don’t require a hard credit check, and they can’t negatively impact your credit either.

Opportunity Cost: Every dollar you spend with a prepaid card is one less dollar you can spend with a cashback credit card or other premium credit card. As mentioned earlier, your goal should be to graduate up from prepaid debit cards, potentially moving to a secured credit card, then to a credit card for fair credit, and eventually to rewards credit cards.

How to Choose the Best Prepaid Card for You

Choosing a prepaid debit card can be done in three simple steps:

Step 1: Determine Why You Need a Prepaid Debit Credit

First, determine why you need a prepaid card. In general, it should be one of three reasons:

  • You need to manage your money and build a better budget
  • You want to teach your kids about money basics and how to budget
  • You want a bank account replacement

If it’s for another reason, there might be a better solution out there for you, and I would suggest you check out other card options besides prepaid debit cards.

Step 2: Write Down Your Prepaid Card Needs

Second, you should write down exactly what you want out of a prepaid card, which could include things like:

  • Cashback or rewards
  • Free ATM withdrawals
  • Free cash reloads
  • No monthly fees
  • And more

It helps if you take it one step further and rank the features you want in order as well.

Just like there are different investment brokers to fit different needs, and various bank accounts to suit different needs, there are prepaid cards to fit different needs as well. Understanding exactly what you want out of your card will help ensure you pick the right card for you.

Step 3: Find the Cheapest Card that Meets Your Needs

Last, you should find the cheapest card that matches your needs from step 2!

Most prepaid cards charge some sort of monthly fee and other fees on top of that, and you need to be diligent to keep these fees at a minimum.

Hopefully, in a few months, you will have your budget under control and will be ready to graduate to a better type of card!

 

This article originally appeared on Your Money Geek and has been republished with permission.

 

 

 

 

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