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How to Maximize the Benefits of Prepaid Debit Cards

Prepaid debit cards can be a great way to gain financial independence and keep track of one’s money. However, these cards are beneficial to a fairly specific population: those who are unable to attain and use checking accounts, for whatever reason that may be. If a person is able to open a checking account a prepaid card can be a quality alternative when used correctly.


The initial benefit of using a prepaid debit card can seem fairly obvious; they provide an easier way of spending and keeping track of money than using cash. The benefits don’t stop there. Prepaid debit cards are very versatile; they allow for ATM withdrawals, security of one’s finances, and in some cases, the ability to directly deposit funds onto the card. All of these features come without the worry of racking up debt and ruining a credit score (spending on a prepaid card does not affect a credit score).

What to Look For

When selecting a prepaid card, it is important to pay attention to the fees. Companies providing prepaid cards make money off of charging fees to the users. Many of these fees seem usual and necessary, such as the initial card purchasing fee, or the monthly maintenance fee (nobody wants to provide a service free of charge). However, in some cases these fees may be just the tip of the iceberg.

Online consumer finance site, NerdWallet compared 82 different card options and projected the annual fees for each. The projections took into account all fees a user could incur, and projected how often these fees would be charged. The comparison yielded projected fees ranging from $39 to $420 annually. The fees in these calculations included transaction fees, deposit fees, balance inquiry fees, customer service fees, ATM withdrawal fees, or ATM decline fees. The difficult part of using a prepaid card is determining what fees are charged and how to keep the fees low. Prepaid cards with high fees are common.

How to Find Fees

The way to keep the fees low is to be proactive when researching which prepaid debit card to use. Visit a prepaid card’s website and locate a list of fees associated with each card, and become familiar with them. This can also be done by visiting a site such as NerdWallet or to do a comparison.

An estimation of what someone will pay in fees each month can be done through estimating how many times one will be charged with the fees each month, and multiplying that by the cost associated with each charge (essentially how NerdWallet got their numbers). For instance, a person may use the ATM 4 times a month. The ATM fee is $2.50, 4x$2.50 = $10/month, or $120 per year. The fees generally vary from card to card, so someone may find very different costs for different cards. If one card entails high costs, a different card will probably suit the person better.

Prepaid cards can be a good financial tool, as long as one can find a card that suits them. The bottom line is to be patient when selecting the right one.  There are good cards available; they just have to be found.

Published Feb 11, 2013.