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These days, the average person owns at least two credit cards. The era of carrying cash seems to be fading away and is being replaced by plastic. But having immediate access to a credit card with a few hundred or even thousand dollar limits can create unfavorable spending habits.
Now, what if we told you that there was an option that could help you escape spending temptation, while also protecting your checking account? This solution comes in the form of a prepaid card! We’re going to break down the benefits of using a prepaid debit card in comparison to a gift card, and stack that against good old cash. Avoid the credit check, approvals from card issuers, late fees, and minimum balances.
Prepaid Card vs. Gift Card
It’s important to point out that a reloadable prepaid debit card and a gift card are not the same. While they both require the card holder to preload money onto them, gift cards are typically specific to one store or merchant, while prepaid debit cards can be used anywhere, can be reloaded, and you can withdraw cash on them from an ATM.
There are a few benefits that come with both. For example, both prepaid debit cards and gift cards are not directly linked to your checking account or credit card limit. This creates a security blanket of protection against spammers and identity thieves. Both cards also allow you to leave your cash at home and carry a slimmer card instead.
Unlike gift cards, prepaid cards can be insured by the Federal Deposit Insurance Corporation (FDIC) for up to $250,000. This provides yet another layer of protection for consumers. Gift cards, unfortunately, aren’t insured by the FDIC or any government entity.
The Best Prepaid Cards
There are a lot of prepaid cards on the market, but the ones we’ve listed below the top the list with their low fees, convenient reload access, and more.
Paypal Debit Mastercard
This card comes with access to directly deposit your funds onto the card. Also, you can make transfers from your Paypal account and use their mobile app to check your balance. This card comes with a $4.95 monthly fee but has a $0 activation fee.
You can personalize your Akimbo account by having different cards for each portion of your budget. For example, you can have an allocated “groceries” card. They also sweeten the deal by having no transaction fees and no startup fees! Be sure to use the card, though. If the card is dormant for a year, you will pay a $5.95 dormancy fee on the 13th month.
Walmart Visa MoneyCard
This card is an excellent option for individuals who are frequent Walmart shoppers. You can earn 3% cash back on Walmart.com, 2% cash back at Walmart gas stations, and 1% cash back at Walmart locations. It comes with a $5 monthly fee and a $5.95 reload fee, but this card has no overdraft fees!
This card has a bunch of appealing features that come along with it. You can directly deposit your funds straight to the card and also check balances with their convenient mobile app. On top of that, you can also earn cashback with their Payback Rewards program (who doesn’t love free money?), and you can deposit checks remotely. If you choose the default Pay-As-You-Go account, you won’t be charged any annual fees or monthly fees.
American Express Serve FREE Reloads
With the American Express Serve card, you get guaranteed fraud protection in case your funds are stolen. The FREE Reloads card will never charge you a fee to put more funds onto your card, which can be a significant benefit in saving money. Keep in mind that this card will come with a $6.95 monthly fee that can’t be waived.
Vanilla Visa Gift Card
While the Vanilla Visa Gift Card isn’t a reloadable visa card, it is an excellent option over a standard retailer gift card and is accepted anywhere Visa debit cards are. If you’d like to get yourself, or someone else, a Vanilla card, any preloaded balance under $100 will cost a purchase fee of $2.95. The purchase fee will increase once you go above $100. In addition, this option is ideal because prepaid Visa Vanilla cards are issued by financial institutions that are insured by the FDIC, making them one of the few FDIC-insured gift cards.
The Pros and Cons of a Prepaid Card
- You can use it online or over the phone. Need to pay a bill or want to shop online? Luckily you can! With a prepaid card, you can use it just like a credit or debit card online. This comes in handy if you want to protect your credit score and credit history from having card numbers or bank account information stolen.
- It’s reloadable. You can add funds to these cards at any time without having to get a new card each time as you would with gift cards. Most cards allow you to reload online, in person at a certified bank or retailer, or via direct deposit straight to the card.
- Fees. In most cases, reloadable prepaid cards have an activation fee, and some may even come with a fee to load money on the card.
- Less protection. If your prepaid debit card information gets stolen, there are fewer fraud protection measures on it than a debit card linked to a checking account or a credit card.
Pros and Cons of a Gift Card
- It can be digital. Do you always lose your cards? Opt for a digital version linked to your card account! That way, you cannot lose your card or your money.
- It can be a budget tool for kids and overspenders. Gift cards are great starter-cards for those who are susceptible to overspending or children who need to learn money management. They can shop at one store and have to keep an eye on the funds on their gift cards!
- The small balance phenomena. Gift cards often go unused when the balance becomes so tiny that you can’t justify using them. About $1 billion goes unspent on gift cards every year!
- No fraud protection. If your card is lost or stolen from you, there is no fraud protection to get those funds back if the thief has swiped them.
So which card is best? The honest answer is that it all depends on your personal and financial situation. It is essential to examine each option carefully to make sure you’re not going to spend a boatload of money on monthly fees. If you opt for one of these cards, make sure the benefits that come along with the card are worth your while.
If you’re also looking for extra funds to place on your reloadable card, you can earn more by joining Swagbucks. With Swagbucks, you can get paid for taking online surveys and giving your opinion in your spare time. You can even save money with coupons, tested and chosen just for you by Swagbucks experts!
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