You load money beforehand on a prepaid debit card, and then use it at ATMs or to make purchases. You can reload the card in a lot of ways. If you do not have a bank account or you’ll require a new approach to budget, prepaid debit cards may be the next plastic to your wallet.

Here is how they work.
A prepaid debit card is another banking card which only allows you to spend the money you load onto the card. Like a debit card, a prepaid card functions at any merchant that accepts its payment method, such as Visa or Mastercard. In addition, it’s called a pay-as-you-go card or, more formally, a general purpose reloadable prepaid card.

How to pick a card
When you get one of these cards from a merchant, bank or credit card company you’re opening a trade account held with a financial institution.

Unlike a debit card, however, it is possible to spend only the amount of money you set in the prepaid card accounts. The card companies typically offer several ways to do this. With some cards, you may even connect to a checking account to make transfers.

Because most prepaid debit cards do not require credit checks, they are simple to get. If you are in one of the approximately 9 million U.S. households without access to a bank account, prepaid cards can be an option.

If you try spending more than you have, most cards only diminish with no fee. Prepaid cards can be helpful for individuals on a fixed income, teenagers who get allowances and relatives visiting from other countries.

But prepaid debit cards have significant limitations as compared with bank account and credit cards. Although they generally have online services, many prepaid cards lack conventional bank services, like a means to withdraw or reload cash at no price. The money that you load on a card will probably not earn interest, either. If you only want to load cash for safekeeping, and do not plan to create many withdrawals, it might be better to obtain a high rate savings account for your funds.

Prepaid debit cards do not affect your credit, so that they won’t help build it.

Prepaid alternatives
If you associate checking accounts with monthly expenses, you may have a different experience with an online checking option. An increasing number of online banks offer accounts without monthly fees or minimum balance requirements.

Prepaid cards vs. debit and charge cards
Prepaid debit cards pay before:You load cash onto the card through cash, checks, direct deposit or a bank account Before paying for trades

Reload alternatives: You can usually add money to a card in numerous ways, like setting up direct deposits, loading money at participating retailers and depositing checks at ATMs. Some convenient cards also allow you to make online transfers from a smartphone.

Charges: You may want to pay for activating a card, making deposits and using out-of-network ATMs. There may be a monthly fee, which sometimes can be waived by having direct deposits. Some cards charge a commission for every purchase and ATM transaction.

Draw limits: Some cards limit how much you can draw, reload or spend during a particular period, including a month daily.

Security: Reloadable prepaid cards don’t have the fraud or liability protections that federal law requires debit cards to own, though that may vary with new rules within another year. Some cards provide purchase protections, but it can be tricky to dispute unauthorized trades or fix mistakes. One shield many cards have is national deposit insurance, meaning that your money is guaranteed if an issuer becomes bankrupt.
You might want to be reissued a card after it expires. Money on the cards do not expire, though. In a 2016 report from the Consumer Financial Protection Bureau, some consumers complained that they had money on their cards when they died but the issuer failed to reissue cards that included those balances. If this happens to you, reach out to the prepaid organization to find out if it can be solved. Otherwise, you can submit a complaint on the CFPB site.

Zero effect on charge: Due to the fact that prepaid debit cards aren’t credit cards, you can’t build credit together. For that, you’d want to consider a secured credit card.

Added perks:Some prepaid cards offer check writing, online bill pay and many copies of a card for family members.

Whether used as a budgeting tool or as an alternate approach to bank, prepaid debit cards can help you save and spend money.