Strict about your budget? Prepaid and debit cards can help you control your spending by setting your balance up front. Note that prepaid and debit cards are not the same as credit cards. If you're looking for a credit card but are concerned about a low credit score, check out these card offers from our partners.
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Updated: January 25, 2018
A prepaid card is a great tool for someone who needs a little help budgeting, doesn’t have the best of credit or prefers the convenience of not always pulling out cash. But they aren’t the same as credit cards and they don’t enjoy credit cards’ greatest advantage – the ability to build your credit. That said, there are plenty of reasons to get a prepaid card. Here we look at:
We look at who can benefit from a prepaid card, how they work and what they aren’t.
Top 4 reasons why Americans have prepaid cards:
Source: Pew Charitable Trusts
People who use prepaid cards:
Prepaid cards are not credit cards, but they still have protections. For example, they usually enjoy federal deposit insurance because the accounts are frequently held by a bank or credit union, according to the CFPB. Also, prepaid cards in a payment network such as Mastercard or Visa might enjoy zero liability protections.
No. A prepaid card is a standalone financial product that you load with money, then it eventually runs out of money unless you reload more. A bank account’s card is called a debit card – it operates in a similar way, but it is tied to the account’s funds. Neither is a credit card, which basically provides short-term loans to the cardholder. A prepaid card can have similar features to a bank account, however. For example, you can use it to deposit your paycheck or auto-debit bills. This is because routing and account numbers can be assigned to the card.
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