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Prepaid Cards: Advantages and Disadvantages

Updated on March 1, 2014
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Carolee is a passionate writer with a love for learning and teaching. She is a published author, poet, blogger, and content creator.

Prepaid cards
Prepaid cards | Source

We are fast becoming a prepaid nation as the world is catching on to this semi new trend. One of the first places to offer this card is the United States of America and I am afraid that the rest of the world is just playing catch up.

Take for instance my own little country. Many people have no idea what a prepaid card is. A couple of years ago I went into my bank and asked if they had a prepaid credit card to offer and was told "yes", but alas, to my chagrin I was introduced to a "secured" credit card instead. When I explained what a prepaid card was, the customer service rep had never heard of it.

To this date only two banks now offer the prepaid card and both have implemented the system less than one year now.

What is a prepaid card?

As the name suggests, a prepaid card is a card where the funds are pre-loaded. You only spend what you have placed on the card. The card functions like a debit card and you don't owe anything to the bank and you do not accrue interest on money soent. So basically you are spending what's yours.

With a credit card you spend money that the bank loans to you which gathers interest so you are always owing the bank. WIth the prepaid card the bank owes you until you spend the money.

There are different types of prepaid cards which are listed below.

Adavngates of the relaodable prepaid card

  • Spend only what you put on
  • Never have to worry about interest
  • Never have to worry about debt
  • Your money is protected by the FDIC
  • Use online, at ATMs or POS worldwide
  • Most cards are free initially
  • Use card to withdraw funds from online payment system if card distributor offers the service
  • Receive and send money to and from other card holders
  • Some cards offer a money remittance service

Disadvantages of the reloadable prepaid cards

  • Spend limit is your limit
  • No interest on moneys loaded
  • Is not a bank account or regular debit card
  • Must pay a monthly maintenance fee and usage fee
  • Some cards are not free initially and must be purchased
  • May have difficulty withdrawing money if bank account details not provided

Reloadable Prepaid Cards

The reloadable prepaid card is by far the most popular prepaid card in existence. This card is like a debit card and you can either get it straight from your US or UK bank or a third party dealer. This card operates as a debit card and does not come with a bank account as opposed to a regular debit card.

The regular debit card has an account of its own while the prepaid debit card utilizes a single bank account for the business that owns the card. The business then distributes the card to individuals who, when they load their card, the money goes to that primary account.

In order to acquire one of these cards the issuing company needs to, in accordance with the Patriot Act, verify your identity. In so doing they would need to collect information that they will store in their database. Such information may include your SSN, driver's license, national ID, passport, address and telephone numbers. The information is required because a bank has to issue the card to the dealer, so each card needs to be verified. Your name will also be engraved on your card unless otherwise stipulated by you.

Usually an online account is provided for the card holder (the company still owns the card), where you can see your account balance, transactions, fees and general account information.

There are some advantages and disadvantages to having one of these cards. I myself have two. But beware, you may face difficulties withdrawing money from some online payment systems.

There are many different reloadable prepaid cards on the market. Below are just a few that I have seen and trust. I suggest when looking for a prepaid card make sure you know the issuing bank. Read the terms of service of the third party issuer, check out their fees, loading times, their payment partners (to know where you can collect money).

  • Rush Card
  • Netspend Visa/Mastercard
  • Payoneer Mastercard
  • Green Dot Visa
  • Paypal prepaid Mastercard
  • Upside Visa
  • Pink Ace Elite (a Netspend card)
  • Paypower
  • Account Now

These are just a few of the cards and you may be familiar with them or know of many more.

debit cards
debit cards

Advantages and Disadvantages of the store value cards


  • No personal info needed
  • Easy to get
  • Use like a debit card
  • Ideal for gifts and teens


  • Not reloadable
  • Limited spending
  • Limited use
  • Not insured

Store Value or Gift Cards

These prepaid cards are not reloadable and you have to keep repurchasing cards as the funds run out.

You can get these cards from many stores and some banks. They are unlike a gift certificate where you can only spend the certificate at the store it was purchased you can use the gift card or store value cards at almost everywhere online, at ATMs or POS. But before you go shopping you must make sure the card bears the "Cirrus" sign.

If the card does not bear this sign it is likely that you cannot use it anywhere but at the store it was bought.

A good store value card would also be associated with Visa, Master, American Express or Discover. Store value cards do not have your name engraved and no personal information is required for purchase.

The VCC or Virtual Credit Card

This is actually a prepaid system that works like a debit card. It has no relation to a credit card and you only spend what you own.

The virtual credit card exist only online and you get a number and PIN so you can purchase stuff online and withdraw money from your bank, online payment systems or receive and send money.

The same rules apply as the reloadable prepaid card above except that you do not get an actual plastic to keep.


  • Reloadable
  • Can spend anywhere online


  • Cannot be used at ATMs or POS
  • No actual card to keep

My expired credit card - expired since 2008
My expired credit card - expired since 2008


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    • Cardisa profile imageAUTHOR

      Carolee Samuda 

      6 years ago from Jamaica

      Hi Angelpq. When I applied for the card there was no fee attached. I think it's safe to come through the mail. I got mine through regular mail and I live in Jamaica. There are very low monthly maintenance fees and ATM withdrawal fees. You can use the card for signature or pin purchases. It costs more to withdraw the money from the ATM than using to purchase. I pay nothing when I use it for signature purchases. Pin purchases you have to pay.

    • profile image


      6 years ago

      Hi Carolee,

      Firstly I must say, great post!! It really cleared up some questions I had about these cards. I am considering applying for a Payoneer card, but I have a question; How did you obtain your card? Is it safe to use the mailing system or do I have to go through Fed X. P.S. Are there any fees involved in obtaining a Payoneer card? Thanks in advance.

    • profile image


      6 years ago

      Hi Carolee,

      First I must say, great post!! It is very informative and really cleared up some questions I had about these cards. I am considering getting a Payoneer card and was wondering, how was yours delivered to you and do you think it is safe to be sent through the mailing system or is Fed X a better option. P.s. Are there any fees required to obtain the card.

    • Cardisa profile imageAUTHOR

      Carolee Samuda 

      6 years ago from Jamaica

      Hi Savvy. If you have a Payoneer card, all you have to do is contact them ans ask for your bank details. They will send you bank information that you can use for transferring money to your card. I use mine to receive money from paypal. Your mom can send you money by purchasing a money pack or adding money to your account by credit card. I will try to find some UK cards for you. Where are you living?

    • profile image


      6 years ago

      I too have a Payoneer card, you mentioned in your last post that you can get your money from abroad. Please explain further, my mom is in the states, can she add money to my card? Also I would also like a prepaid debit card that has a UK bank account similar to Payoneer, are you familiar with any? Any answers I can get, I will appreciate. Thank you.

    • Cardisa profile imageAUTHOR

      Carolee Samuda 

      8 years ago from Jamaica

      Hi Teaches, for people like myself who can only get our money from abroad via this method it is worth the payment. I pay $1 for POS signature purchases and $2.50 for ATM withdrawals and PIN purchases. So what I do is either withdraw everything all at once or spend directly from the card depending on the amount of transactions I use the card for.

    • teaches12345 profile image

      Dianna Mendez 

      8 years ago

      Thanks for posting this information. I especially learned from your advantages and disadvantages on the subject. True, the ability to reload is great but having to pay for the service is not such a great incentive to use.

    • Cardisa profile imageAUTHOR

      Carolee Samuda 

      8 years ago from Jamaica

      Hey Loi, the alternative is the Payoneer card, issued to Jamaicans. I will email you in a few minutes with details.

      My credit card expired in 2008 so no worries there. The prepaid debit card that matters is the payoneer ad I blotted that

    • Loi-Renee profile image


      8 years ago from Jamaica

      Thank you for all this great information Carolee. I was having problems getting the card you recommended so I am looking for a possible alternative. Please be careful though, your credit card number is visible in the photo.

      Voted up and shared.


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