For people who can’t qualify for a credit or debit card — or simply don’t want one — prepaid debit cards can be an effective alternative.
Prepaid debit cards make it easy to control your spending and avoid costly overdraft fees because you can spend only what you load onto the card. Some are even coupled with a high-yield savings account, making saving for the future more lucrative.
However, other prepaid debit cards come with a bunch of fees, so it’s important to compare the best ones to maximize your savings.
Why you should consider a prepaid debit card
Prepaid debit cards differ from credit and debit cards in that they’re reloadable — whatever money you add is the amount you’re able to spend. Also, they’re not tied to a credit line or checking account, so you don’t need to worry about paying interest or overdraft fees.
A prepaid debit card can be a great budgeting tool because once the balance is gone, it’s gone. You can add a certain amount of money to the card each week or month and easily hold yourself to spending only that amount.
Plus, since there’s no credit line, prepaid debit cards don’t require a credit check.
At a glance: The best prepaid debit cards
Here’s a quick summary of the best prepaid debit cards. Read on to learn more about each card and its features, benefits, and drawbacks.
Bluebird by American Express
If you’re fee-averse, the Bluebird by American Express is about as good as it gets.
You won’t be charged a fee for any of the following:
- Monthly maintenance
- Online account opening (you might be charged up to $5 to open an account at a retail location)
- Direct deposit
- Cash reload at Walmart (other retail locations might charge up to $3.95 per reload)
- Online reload with a debit card
- Mobile check deposit (takes 10 days for the money to be available)
- Withdrawal at MoneyPass ATMs (25,000-plus ATMs nationwide)
- Bill pay
- Stop payment
- Sending money to other Bluebird accounts
- Foreign exchange
- Replacement card
If you share your finances with a significant other or have a family, the Bluebird’s family accounts make it easy to manage your money together:
- You can have up to four cards total (including yours).
- Cardholders can fund cards online or with the Bluebird mobile app.
- You can set daily spending limits, create alerts, and turn ATM access on or off for each card.
With the Bluebird, you’ll get several benefits that aren’t common among prepaid debit cards, including:
- Purchase protection: in case an item you purchase is damaged or stolen
- Fraud protection: in case your card is lost or stolen
- Amex Offers: discounts and cash-back offers at restaurants and retailers
- Roadside assistance hotline: a tow truck or locksmith in case of an emergency on the road
- Access to advance ticket sales: tickets to concerts, sporting events, and other entertainment before the masses
Can’t reload via your checking account
The Bluebird offers a few free ways to add money to your account, but a checking account isn’t one of them.
If you have a checking account but no debit card, your only fee-free options to add money are direct deposit and cash reloads at Walmart.
American Express isn’t as widely accepted as Visa or Mastercard in the U.S. or internationally. Be sure to keep cash on hand in case a small retailer won’t accept your card as a form of payment.
Mango Visa Prepaid Card
As of July 2017, the average annual percentage yield (APY) for savings accounts in the U.S. is a measly 0.06%. With the best online savings accounts, you can get up to 1.10% APY, but even that number pales in comparison to what the Mango Visa Prepaid Card offers.
High savings APY
With Mango, you can get up to 6.00% APY on balances up to $5,000. So you could earn $300 per year with a $5,000 balance, compared to $3 per year with the average savings account.
The only caveat is that you must have a net direct deposit of $800 or more each month and a minimum balance of $1 at the end of the month. Mango defines net direct deposits as direct deposit transfers into your account minus transfers out.
You’ll earn 2.00% APY on balances up to $5,000 if you don’t meet the requirements. If your balance is more than $5,000, you’ll earn 0.10% APY on the portion of the balance over $5,000.
Although Mango doesn’t offer subaccounts, you can invite your significant other to join Mango and get a $10 referral bonus. They must enroll, activate the card, and receive a recurring direct deposit of at least $50 for you to get the bonus.
You also can refer family and friends; there’s no limit to how many referral bonuses you can receive.
You’ll pay a $3 monthly maintenance fee with the card. Other fees include:
- $2 fee every time you withdraw money from an ATM
- $1 fee for ATM balance inquiries
- 2 percent currency conversion fee when you use your card abroad
For cash reloads, you’ll pay up to $4.95 per transaction, depending on which retailer you use. Participating retailers include Walmart, 7-Eleven, Walgreens, Rite Aid, CVS, Kmart, and more.
If you plan to use the Mango savings account, the interest you earn could easily make up for the fees. You also won’t pay a fee for the following activities:
- Signing up
- Transferring money to another Mango card
- Bank transfer load
- Direct deposit
- PayPal transfer load
Some key features are missing
The Mango card doesn’t offer bill pay or mobile check deposits. You also can’t add multiple cards per account to share with family.
The card’s savings component is unbeatable, but if you’re looking for a prepaid debit card that offers the whole kit and caboodle, this one isn’t it.
No zero-liability fraud protection
Mango shares tips on its website to avoid fraud, but it won’t give you full protection from fraudulent purchases.
If fraud does occur, you can submit a dispute with Mango, which can take 45 to 90 days to resolve. But ultimately, there’s no guarantee you’ll get the money back.
American Express Serve Cash Back
The American Express Serve Cash Back is a rare prepaid debit card in that it offers rewards on purchases. Depending on how much you spend, you could easily make up for some, if not all, of the card’s fees.
The Serve Cash Back card offers unlimited 1 percent cash back on all purchases. The amount you earn gets added to your prepaid debit card account, and you can use it for future purchases.
Let’s say you spend $1,500 per month with your prepaid debit card. You’ll earn $15 per month in rewards — or $180 per year. Even among debit cards that offer rewards, you won’t get that kind of return.
Note that ATM withdrawals, fees, and bill pay transactions aren’t considered purchases and don’t earn cash back.
If you want to add children or a significant other to your account, the Serve Cash Back allows you to do so. Keep in mind, though, that purchases on a subaccount don’t earn cash back.
Like the Bluebird, the Serve Cash Back offers fraud protection if your card is lost or stolen. You’ll also get purchase protection in case an item you purchase is lost or damaged. For ATM withdrawals, you’ll get access to more than 24,000 ATMs fee-free through the MoneyPass network.
Although the card offers 1 percent cash back on every purchase, you’ll have to spend at least $595 per month to make up for the card’s monthly fee of $5.95. You’ll also pay up to $3.95 per cash reload, regardless of where you do it.
There are no fees for the following:
- Signing up online (up to $3.95 through a retailer)
- Direct deposit
- Bank transfer reload
- Bill pay
- Sending and receiving money between Serve accounts
- Adding a subaccount
- Card replacement
Like the Bluebird, the Serve Cash Back is issued by American Express. Because some small businesses might not accept American Express, keep a bit of cash in your wallet.
Should you choose a prepaid debit card?
Prepaid debit cards are a perfect choice if you have trouble with overspending or want help sticking to your budget. They’re also a nice alternative to credit and debit cards if you can’t qualify for either.
But if you’re looking to build credit, a prepaid debit card isn’t for you. Since there’s no credit line involved, prepaid debit cards don’t help build credit. If that’s what you’re looking for, consider a secured credit card instead.
As you compare the best prepaid debit cards, focus on the features that matter most to you. For example, if you spend a lot, you’ll likely earn enough rewards with the Serve Cash Back to more than make up for its fees.
If you’re more interested in avoiding fees, though, the Bluebird might be a better choice. The good news is that applying for prepaid debit cards doesn’t affect your credit or ChexSystems record.
Banks report checking and savings account activity to ChexSystems, and having several bank accounts on your record can raise red flags. So if one prepaid debit card doesn’t work out for you, there’s no harm in switching to another.
To avoid the extra work, though, make an effort to get the right card the first time.
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