Best prepaid cards

Here’s The Best Prepaid Debit Card For You

If you’ve heard of prepaid cards at all, you’ve probably heard bad things.

They’ve got crazy hidden fees. They’re just celebrity-endorsed rip-offs like the Kardashian Kard. They target “the underbanked,” the polite industry term for desperate people who can’t get a checking account or credit card.

A lot of people use prepaid cards as an alternative to checking accounts, and last week the Consumer Financial Protection Bureau proposed regulating them the same way. The CFPB would force prepaid card companies to offer everything from standardized fee information to fraud protection.

Also last week, Consumer Reports rated the best and worst prepaid cards — but it didn’t bother to spell out the fees for individual cards. That’s not much help for people who need one of these cards.

So Debt.com looked into the terms and fees of more than two dozen cards. We found specific and narrow circumstances where these cards can work for you. Here’s what we recommend, along with the information that really matters to consumers.

 The best card for…

Paypal prepaid card
People who use PayPal for small business: PayPal Prepaid MasterCard 
Monthly Transactions ATM Inactivity Activation Account closing Card replacement
 $4.95 $0  $1.95 $0  $0 $5.95 $5.95

There are a handful of cards that can link with a PayPal account, but most don’t make it easy. PayPal offers its own card that allows real-time transfers of up to $300/day from a PayPal account. You can still load money through direct deposit or at “more than 130,000 NetSpend Reload Network locations” (at pharmacies, gas stations, convenience and grocery stores) nationwide.

Although this card has an unavoidable $5 monthly fee, it also has an unusual refer-a-friend program that can get you a $5 credit each time, and an optional savings account that earns 5 percent interest on up to $5,000 — better than most banks.

(You earn no interest on the card’s funds, but can transfer them to or from the savings account.)

If you sell on eBay, Etsy, or anything else that uses PayPal as a payment method, this card could be great. Consumer Reports didn’t look at this one at all.

Kaiku prepaid
People who can’t use direct deposit: Kaiku Visa Prepaid
Monthly Transactions ATM Inactivity Activation Account closing Card replacement
 $1.95 $0  $0 $0  $0 $12.50 $4

Several cards waive or reduce monthly fees if you direct deposit a certain amount each month. (Direct deposit is almost universally a free feature.) That can make those cards virtually free if they don’t charge per transaction.

Kaiku doesn’t waive its monthly fee. But it’s probably the next-best place to go if you can’t meet the direct-deposit requirements of other cards because your employer doesn’t offer it, you’re self-employed, or you don’t have enough income.

Fee waivers aside, Kaiku is the cheapest Visa you’re likely to find. There’s no penalty for not using the card — many charge a recurring inactivity fee after a few months — no fee for transactions, and no fee for using 55,000 in-network ATMs. Consumer Reports didn’t look at this card, either.

serve
People who use cash or any other cards: American Express’ Bluebird or Serve
Monthly Transactions ATM Inactivity Activation Account closing Card replacement
$1 $0 $0 $0 $0 $0 $0

Consumer Reports ranked Bluebird best and Serve third-best. But you should know they’re almost identical — and that there’s an important catch with both.

The biggest difference between the two is that Serve has a $1 monthly fee, waived when you load $500 a month. Bluebird has no monthly fee, which makes it a slightly better option for most people. (Credit card geeks regularly debate the nuances of both.)

Why would they do that? What’s the catch? Well, in a word, it’s the network. Most prepaid cards use the Visa or MasterCard networks. Those are so widespread you don’t have to think about whether a retailer will take your card.

Not so with American Express. Just do a search for “accept Amex.” Some retailers and restaurants think American Express’ rules and fees are too much to bother with. While millions do take their cards, enough don’t that it could be a hassle if you go through life without other options.

One way to get more retailers accepting American Express is to get more people using it. So that’s why it offers two cards with almost no fees. AmEx doesn’t care if you use them often, it just wants as many people as possible to own one — to pressure merchants to take American Express.

If you’re OK with all that, you get the best terms on the prepaid market. And since prepaid cards don’t affect your credit, you might as well get one alongside a Visa or Mastercard. That, or carry enough cash to cover merchants who don’t take Amex.

General tips to using prepaid cards

Fees vary from card to card, but many things don’t. Here’s some advice to keep costs down…

  • The monthly fees on a card can often be waived by depositing a certain amount monthly, often between $500 and $1,000.
  • Direct deposit, mobile check deposit and card-to-card transfers are the cheapest ways to load money onto a card. Reloading at stores can cost up to $5.
  • Some cards charge a fee per transaction, and there may be different fees for things you pay for with a PIN and things you pay for with a signature.
  • Preauthorizations can tie up your money. When you agree to pay for something whose final price isn’t known up front — like gas — they estimate and put a hold on some funds, then let go of the extra. It can take a few days to clear, but you can avoid it by paying inside instead of at the pump.
  • Instead of using ATMs that may have fees, you can get cash back while purchasing something at grocery and drug stores, just like debit cards.

Prepaid debit cards aren’t the ideal way to pay for stuff, but they don’t have to be a terrible way. You also don’t have to use them forever. The goal should be to build credit and get a card that works to your advantage.

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