How do prepaid debit cards work and are they right for You? Advertiser disclosure You’re our first priority. Every time. We believe everyone should be able make financial decisions with confidence. Although our site doesn’t feature every company or financial product on the market however, we’re confident that the guidance we offer, the information we provide and the tools we develop are impartial, independent simple, and cost-free. How do we earn money? Our partners compensate us. This can influence the products we write about (and where those products appear on our website) However, it doesn’t affect our recommendations or advice that are based on thousands of hours of research. Our partners are not able to be paid to ensure positive ratings of their goods or services. . How do prepaid debit cards Function and Are They the Right Choice for You? Pay in advance for money on the debit card that is prepaid, and then make use of it at ATMs or to make purchases. You can reload the card using a variety of ways. by Spencer Tierney Senior Writer | Certificates of deposit ethical banking, ethical banking, bank deposits Spencer Tierney is a consumer banking writer at NerdWallet. He has been writing about finances for individuals since the year 2013 with a particular emphasis on deposits and certificates as well as other topics related to banking. He has had his work covered in The Washington Post, USA Today, The Associated Press and the Los Angeles Times, among other publications. He’s based within Berkeley, California. Mar 18 2022, 2022 Edited by Yuliya Goldshteyn Assistant Assigning Editor Banking Yuliya Goldshteyn is a bank editor for NerdWallet. She has previously worked as editor, writer, and researcher in industries which range from healthcare as well as market research. She received a bachelor’s level degree in history at University of California, Berkeley. University of California, Berkeley and a master’s degree in social sciences from the University of Chicago. She can be reached by email at

. Review by Kathleen Burns Kingsbury Wealth psychology expert and coach Kathleen Burns Kingsbury, founder of KBK Wealth Connection and host of the Breaking Money Silence podcast, is a widely published author and speaker. As an expert in the psychology of money, Kathleen was featured on TV, and her work has been featured on The New York Times, The Wall Street Journal, “PBS NewsHour,” Money magazine, Today Money, Forbes and CNBC. Kathleen was an adjunct faculty member at McCallum Graduate School from 2009 to 2019. McCallum Graduate School at Bentley University from 2009 to 2019, and is now a professor in the college of Champlain College. At NerdWallet our content is put through an extensive . We are so confident in the accuracy and quality of our content that we let external experts examine our work. A majority or all of the products we feature are provided by our partners who compensate us. This affects the products we write about and the location and manner in which the product is featured on a page. But, it doesn’t affect our assessments. Our views are our own. Here’s a list of and . A prepaid debit card is the alternative to bank accounts and only lets you spend the money you load onto the card. As with the debit card, these cards can be used at any store that accepts their payment system, which is typically Visa as well as Mastercard. They’re more secure and convenient as opposed to cash. The majority of prepaid debit cards do not require credit checks, so they’re simple to obtain. If you’re in one of the 7 million U.S. households without access to a bank account, prepaid cards can be an option to spend money without using the bank. Here’s how you can get an prepaid debit card and how they work. How do I buy an pre-paid debit card? You can buy a prepaid debit card from banks, a retail store, credit card company or another financial services company. When you purchase one, your is usually a in an account managed by a bank or credit union. Be aware that these cards can be called stored-value cards, pay-as-you-go cards or, more specifically, general-purpose reloadable prepaid cards. Are you looking to compare prepay cards? See our list of Nerdy Tip If you’re looking to establish credit or you’ve been refused a bank account, a prepaid debit card might not be the best option: , and if you’re unable to open a regular checking account, you can try . These accounts provide another shot at banking that is mainstream and offers benefits. Savings Cash Management CD Checking Money Market savings account is where you can store funds in a secure manner while earning interest. Savings accounts are an account where you can store money securely as well as earn interest. Members FDIC SoFi Checking and Savings APY 3.75 percent SoFi customers with direct deposit can earn up to 3.75 percent annually-percentage yield (APY) for savings accounts (including vaults) and 2.50 percent APY on checking balances. The minimum amount of direct deposit that is required to be eligible for 3.75% APY on savings, and 2.50% APY for checking balances. Direct deposit members will receive 1.20% interest on balances in checking and savings (including vaults). Interest rates are variable and can change at any time. These rates are current as of 01/04/2023. Additional information can be found at http://www.sofi.com/legal/banking-rate-sheet Min. balance for APY $0 Member FDIC Marcus Online Savings by Goldman Sachs Account APY 3.50 percent 3.50% APY (annual per cent yield) with a balance of zero to earn the stated APY. Accounts must have a positive balance in order to be open. APY current as of 02/07/2023. Min. balance for APY Cash accounts are $0 and provide a range of services and features similar to checking, savings and/or investment accounts in one product. These accounts for managing cash are typically provided by non-bank financial institutions. These cash accounts combine features and services that are similar to checking, savings or investment accounts into one account. Cash management accounts are typically offered by non-bank financial institutions. On the website of Wealthfront, you can find Wealthfront Cash Accounts APY 4.05% min. Balance to APY $1 on Betterment’s website Betterment Cash Reserve Paid non-client promotion APY 4.00 percent annually percentage rate (variable) is at 02/06/2023. Min. balance for APY CDs of $0 (certificates of deposit) are a kind of savings account with a fixed rate and term generally, and offer higher rates of interest than regular savings accounts. CDs (certificates of deposit) are a type of savings account with a fixed rate and term which usually come with more interest rates than regular savings accounts. CIT Bank CD APY 4.60% 1.5% Term 1.5 year FDIC Marcus by Goldman Sachs High-Yield CD APY 4.6 FDIC Marcus by Goldman Sachs High-Yield CD APY 4.40% 4.40% APY (annual per cent yield) at 01/25/2023. 1 year 1 year Member FDIC SoFi Checking and Savings APY 2.50% SoFi members with direct deposit can earn up to 3.75% per year in annual percentage yield (APY) for savings accounts (including Vaults) and 2.50 percent APY on their checking balances. There is no minimum direct deposit amount that is required to earn the 3.75% APY on savings, and 2.50% APY for checking balances. Direct deposit members will earn 1.20% APY on all account balances in checking and savings (including vaults). The rates of interest are variable and may change at any time. The rates listed are current at 01/04/2023. Additional information can be found at http://www.sofi.com/legal/banking-rate-sheet Monthly fee $0 Upgrade – Rewards Checking APY N/A Monthly fee $0 Deposits are FDIC Insured Current Account APY N/A Monthly fee $0 Deposits are FDIC Insured Chime Checking Account APY N/A Monthly fee $0 Member FDIC Axos Bank(r) Rewards Checking APY 1.25% Receive monthly direct deposits totaling $1,500 or more to earn 0.40% APY. Make use of your Axos Visa(r) Credit Card to make 10 transactions each month (min three dollars per purchase) or enroll for Account Aggregation/Personal Finance Manager (PFM) within Online Banking to earn 0.30 percent APY. Maintain an average daily amount of $2,500 in An Axos Managed Portfolios Invest Account to earn 0.20% annual percentage yield. Keep an average daily balance of $2,500 in An Axos Self Directed Trading Invest Account to earn 0.20 percent APY. Use the Rewards checking account for your full month’s Axos customer loan payment and earn 0.15% APR. Monthly fee of $0. Money market accounts pay rates comparable to savings accounts and have some checking features. Market accounts earn rates that are similar to savings accounts and have certain checking features. Members FDIC UFB Best Money Market APY 4.21% Min. balance for APY $0 Member FDIC Discover Bank Money Market Account APY 3.20 Percentage Min. amount of APY $1 How do prepaid debit cards function? Debit cards vary widely, but they generally feature these characteristics in common: Fees: You might be required to pay for activating or getting a card, making deposits and making use of ATMs outside of network. The most common is a monthly charge that can sometimes be reduced — through direct deposits, for example. Certain cards charge fees for every purchase or ATM transaction. Options to reload: Customers are able to usually add money to your card in a variety of ways, like making direct deposits and loading cash at participating retailers and depositing checks at ATMs. Some cards also let you transfer funds online or make mobile check deposits via a smartphone. ATM access: Some prepaid cards have access to no-cost nationwide ATM networks, like MoneyPass and Allpoint as well as to branded bank networks for cards issued by banks. Limits on amounts: Certain cards limit how much you can spend, withdraw or reload within a specific time frame like a day or month. Security: Prepay cards that can be reloaded have the liability and fraud protections required of debit cards by federal law. Some cards have purchase protections however it is difficult to challenge transactions that are not authorized or fix mistakes. A security feature that many cards offer are federal deposits insurance, meaning your money is protected if the issuer goes bankrupt. Expiration dates: Prepaid cards have expiration dates. The funds on the card shouldn’t expire, but you’ll have to be reissued a card before the expiration date is reached to allow you to use it. In a report released in 2016 by the Consumer Financial Protection Bureau, some consumers complained that they had money on their cards when they expired, but the issuer did not issue cards that included those balances. If this happens to you contact the prepaid card company to determine if the issue can be solved. If not, you may seek assistance on the CFPB website. Other features Certain cards with prepaid offers check writing, online bill pay or multiple copies of a cards for relatives. Some cards even provide rewards like money back when you purchase, like rewards credit cards can do. >> Think a debit card might be the best option for you? Read more about Limitations of prepaid debit cards. Prepaid debit cards are a bit limited when compared to banking accounts and credit cards. Although they typically come with online services, some prepay cards don’t have standard banking features, including a way to withdraw or transfer cash at no cost. The money you load onto a card is likely not to be earning interest, neither. If you’re only looking to keep cash on hand for safekeeping and don’t intend to make many withdrawals, it may be better to find a high-rate savings account for your funds. The debit cards you purchase with prepaid cards won’t impact your credit score, therefore they will not help you build it either. There is no impact on credit scores Since they aren’t credit card, you aren’t able to build credit with them. In that case, you’d need to . Lack of bank service: Prepaid credit cards don’t automatically have all the features that you’d expect from accounts for checking, like access to an ATM and branch networks, online or mobile banking, as well as bank services like wire transfers, as well as the capability to stop the payment. Previous horror stories: Many prepaid cards have been affected by technological outages that lasted for weeks or days. The parent company of RushCard switched its payment processor in 2015 to Mastercard in 2015, a technological glitch locked hundreds of thousands of customers out of their RushCard accounts for days. The Walmart MoneyCard experienced an outage in the year 2016. Netspend has settled against a Federal regulator on allegations that customers were prevented in accessing accounts. Netspend also offered refunds to customers who were qualified. If you want a checking account without monthly fees, consider our list of . Also, there are options for those with bad credit or banking history. When used as a budgeting tool or an alternative method to bank, prepaid debit cards can help you store and spend money. Prepaid debit cards are different from. debit and credit cards. Here’s a brief overview of the difference: Prepaid debit cards -Pay before: You load money onto the card using cash, checks, direct deposit or transfer from an account prior to paying for transactions. A checking account is not required. Debit cards — pay immediately: You make use of funds directly from a checking account when paying for purchases or withdrawing cash from an ATM. Credit cards — pay later: You can borrow money from a bank when you make use of the card. You pay the money back later. Are you ready to explore the options available to you? Check out our picks for the Prepaid debit card alternatives If a prepaid debit card isn’t quite right for you, then you could choose a more suitable alternative using the option of a checking account with no fees. Although certain checking accounts are subject to monthly fees There are a lot of institutions online offer accounts that don’t have monthly fees and minimum requirements for balance and there are options in case you’ve experienced issues with bank accounts previously. Take a look at these three accounts, including one that does not require your (ChexSystems is the agency for reporting that banks use to track those who’ve had issues with previous bank accounts). The NerdWallet ratings are made by our team of editors. The scoring formulas consider multiple data points for every financial service and product. at Chime deposits are FDIC Insured Monthly Fee: $0. Access to ATMs free of charge: Over 60, 000 ATMs. Bonus benefits such as no overdraft charges. No ChexSystems records check. More info from Chime Chime declares: “Cash withdrawal and third-party fees can be charged. Chime is a technology-based financial company, not a bank. Services for banking are provided by debit card issued by the Bancorp Bank or Stride Bank, N.A. and Members of the FDIC.” The ratings of NerdWallet are compiled by the editorial staff. The scoring formulas consider several data points associated with each financial service and product. Monthly cost: $0. Free ATM access: Over 43,000 ATMs. Bonus features: Account pays interest. The ratings of NerdWallet are compiled by our editorial team. The scoring formulas take into account several data points associated with each financial service and product. Monthly cost: $0. Access to ATMs free of charge: Over 70k ATMs. Bonus features: Account pays interest. About the author: Spencer Tierney is an expert on deposits and certificates at NerdWallet. Its work was highlighted by USA Today and the Los Angeles Times. Similar to… Discover an account that is more suitable for checking View NerdWallet’s top picks for the top checking accounts. Go deeper into banking. 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