Prepaid debit cards come in a bunch of different varieties. Sometimes it can be a bit confusing figuring out which type of prepaid card is right for you. This article gives details of four kinds of prepaid cards (so you can figure out which kind is right for you).
Prepaid debit cards come in several varieties. Each has a different purpose, but all have one thing in common: you get a card that you can use to buy goods or services. With each purchase, as the card is swiped through a card reader (or is used to make an online purchase), the value goes down. These cards are “debit” cards since there is no credit extended to you — you can only spend as much as you have on the card (or in the account associated with the card).
It also may be possible to add value onto some pre-paid cards. Sometimes fees may be associated with these cards, so be sure to ask about the potential costs. Examples of four kinds of common and popular prepaid cards include:
• Prepaid Debit Gift Cards. Think of them as high-tech gift certificates. Some are for use at a specific store or service provider (like the extremely popular Walmart Gift Card). Others are “universal” gift cards that generally can be used at any retailer that accepts credit and debit cards but usually cannot be used to obtain cash from ATMs and other sources.
While prepaid gift cards are great for birthdays or other occasions, they come with potential risks and costs. That’s why you should always read disclosures carefully and ask, for example, if a card has an expiration date that could wipe out a remaining balance after a certain time period (something prohibited under some state laws) or if fees will be deducted when the card is used – or not used. Check back with this site, as we will review some of the best prepaid gift cards for you, so you can get the best deals possible.
• Prepaid debit cards issued by financial institutions for use at a variety of businesses and ATMs. These cards generally can be used at most retailers that accept debit or credit cards. They also may be used to obtain cash from ATMs and are especially useful as substitutes for traveler’s checks. Some pre-paid debit cards also can be used to make purchases on the Internet.
• Payroll cards. With these, an employer deposits salary or benefit payments into a bank account, which an employee can access using a special debit card to withdraw cash at an ATM or make purchases at a merchant sales terminal. “Payroll cards are primarily good as substitutes for paychecks for employees who don’t have a bank account and might otherwise pay high fees to a check-cashing store,” said FDIC attorney Christopher Hencke.
• Debit cards for Health Savings Accounts. Consumers who are eligible under IRS rules for these tax-advantaged savings accounts at banks and other financial institutions can save for certain medical costs, including doctor fees and long-term care insurance payments, and then use a debit card (or write a check) to pay for qualified medical expenses.
Here is a final thought to help you get the most out of your prepaid card. If a prepaid card is lost or stolen: A consumer’s liability for a lost card may vary depending on the type of card and who is issuing it. For example, a pre-loaded card issued by a bank or a major card network may provide more consumer protections than one issued by a retailer, “but to be sure you need to shop around, read the card’s terms and conditions, and find out what to do if you lose your card,” said David Nelson, a fraud specialist at the FDIC.
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