Reloadable Debit Cards
Filed Under Prepaid Debit CardsReloadable debit cards are extremely convenient to use. They’re just like credit cards, only better. In fact, I think reloadable prepaid debit cards should be your first choice when it comes to personal financial spending tools. But let’s face it, these types of cards are not well known – the term “reloadable prepaid debit” confuses some people. So what makes them such great tools? Why are they so convenient? And why should I load my hard-earned cash onto one of these cards in the first place? These are all good questions, so let’s have a chat.
Why Reloadable Debit Cards?
First off, it’s important to understand that the reloadable prepaid card industry was basically born to serve a segment of the population known as the “Underbanked.” These are mostly hard-working folks who don’t have a strong relationship with a bank or a savings and loan. As a result, they use cash in most of their everyday transactions.
Now these folks usually don’t have a strong relationship with a bank because of one of two reasons. One, they either just don’t want to do business with a bank – they don’t trust them or they just don’t see the need. Or two, the banks don’t want to do business with them. And that may be due to poor or non-existent credit histories or other financial “black marks.”
Prepaid debit cards (sometimes known as “stored value cards”) were created to serve this population but they’ve now grown into a mainstream product used by everyone. That’s because they give people the ability to use their cash in transactions where cash just isn’t used. They basically act as plastic bank accounts for their owners. And, since they don’t require credit checks and they’re easy to acquire – you could apply for any of the following offers right now!
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But Are Reloadable Debit Cards Convenient?
These plastic bank accounts are very convenient to use because they can be used just like a normal credit card. In fact they look just like credit cards – there’s no real physical difference between a Visa debit card or a MasterCard debit card and their credit cards cousins. That means you can use a debit card online to make an Internet gift purchase. Or you can use prepaid reloadable debit cards to pay bills online. And of course you can just walk into a store and use your reloadable debit card to buy any item you see because most stores accept debit cards. They’re basically easier to use than cash in most cases.
Also, just about every reloadable debit card today comes with ATM privileges. So you can use a card to pull cash out of many different locations if you want to. Just the thing for those times when you find it’s handier to use cash than plastic.
Debit Card Security
Now let’s talk about security. By using a reloadable prepaid debit card you avoid having to carry around a lot of cash. That, in and of itself, can leave you feeling more secure. But there are other advantages too. If you happen to lose a prepaid debit card or have it stolen, you can report it and have it replaced. If you report the loss quickly enough, you’ll minimize or completely avoid losing any value on the card through fraudulent use.
There’s also another kind of security you get with reloadable Visa debit cards or MasterCards. I call it “credit security.” That’s because using a prepaid debit card protects you from over spending and thus messing up your credit. Think about it for a moment. These are prepaid cards so they’re loaded up ahead of time. You spend down your balance as you go until there’s either no balance left or you reload them with more cash. You can’t spend more than you’ve loaded (unlike a credit card) so you can never dig yourself into a credit hole caused by a high credit card APR. All the top reloadable debit cards work like this.
This actually works in your favor because reload debit cards make it easier for you to stay within your budget. You commit yourself to spending only the money you’ve already earned or saved. Contrast that with what’s been happening in the credit card world where people have been able to spend money they haven’t even seen yet (i.e. their credit). And then they end up paying interest on top of it because most people end up making minimum payments on their cards instead of paying off the credit card balance each month.
That means, for instance, when you buy groceries with your debit card you’re only paying for the groceries once. On the other hand, when most people buy groceries with their credit cards they usually end up paying for the groceries themselves plus another 15% to 29% interest on top of that. You don’t need an accountant to tell you that if you keep on spending more than you have to for your routine purchases, you’ll end up with less money for anything else in the long run.
Reloadable Debit Cards for Kids
This spending and budgeting benefit can carry over to your kids too. That’s because there are reloadable prepaid cards for kids too. These debit cards (AKA student debit cards) are just like every other reloadable prepaid debit card except that they’re designed for kids (i.e. teenagers) and they’re linked to a parent’s account. They carry with them all the same benefits and options as other cards so your child can learn about spending and saving through normal use of the card.
There’s an added benefit for parents as well. You see, you can keep track of all the spending done with your youngster’s card. You can track it online from the debit card company’s website and you can have phone or text alerts set up as well. You can always be in touch with how your youngster’s using their debit card.
Lastly, with reloadable cards for kids you can do the reloading too. That means you can reload the debit card for your boy or girl anytime you want or need to. That can come in really handy if your kid goes off on a school trip or away to college. It’s been very handy in my life on at least two occasions.
Reloadable Visa Cards vs. Reloadable MasterCards
From a consumer point of view, there aren’t any meaningful financial differences between a reloadable Visa or MasterCard. Prepaid card companies often sell both varieties of cards and their prices and fees are usually the same. You won’t save any money by going with a reloadable Visa card versus a MasterCard.
From a purchasing standpoint there’s no real difference either. Oh you can come across the occasional merchant that accepts one type of card over the other, but that’s getting to be the exception rather than the rule. In the “old days” banks would align themselves with one or the other Association (i.e. Visa or MasterCard) and only issue those cards. Those days are gone as most banks issue both types of cards now.
The only real difference as I see it is an esthetic one. Which card do you find more attractive? Or which logo do you like better? Choose a prepaid reloadable Visa if you find one that you like the look of; or a MasterCard if one of those catches your eye. The money features and expenses will be the same.
Are There Free Reloadable Debit Cards?
Now there are a lot of great reasons for choosing to use a MasterCard debit card or a Visa debit card, but “free” isn’t one of them. There’s no such thing as a free reloadable debit card – they all come with certain costs. Let me lay them out for you.
The costs of reloadable debit cards come in the form of fees. The worst cards will have a lot of nickel and dime fees that are hard to keep track of. The best cards will have a small set of easily understandable fees and some of those fees will be avoidable if you use the card actively – that means a certain minimum number of times each month.
Prepaid Debit Card Fees
While you might not like the idea of paying debit card fees, keep in mind that they usually compare very well with credit card charges. Remember, credit cards charge interest – sometimes lots of interest – and prepaid cards charge none. Then there are all the extra fees that credit card companies zing you with when you’re not looking – fees like over-limit fees, late payment fees, and yearly maintenance fees. Again, these are fees you won’t see with reloadable cards. Let’s look at three of the usual fees just about every debit card has.
Purchase Fees
There will be a fee to purchase the reloadable card in the first place. That’s right, you actually buy a reloadable debit card; there are no free debit cards. And for the cost of the card you get a true Visa or MasterCard, personalized with your name on it, and an expiration date set anywhere from one to three years from your purchase date. This fee will run you somewhere between $3.00 and $10.00 depending on the card and card company.
Reload Fees
You’ll also pay a fee every time you reload a debit card. This is pretty standard in the industry. It’s usually a fairly small fee that stays the same no matter how much money you’re loading onto the card. Again, this depends on the card and the card company but it will cost between $3.00 and $9.00. However, some companies will waive the reload fee if you set up an automatic direct deposit to your card of some set amount. Check the individual prepaid card company websites as they all play around with the amounts periodically.
Monthly Maintenance Fees
Then there’s the monthly maintenance fee. This is also pretty standard in the industry. And again, it’s usually fairly small – in the $3.00 to $7.00 range. Sometimes these are avoidable too –for instance if you use your card for some set number of purchases each month. Again, check the card company websites for their specific terms and conditions.
You’ll only pay the purchase fee one time for a reloadable debit card. You’ll only pay the reload fee when you choose to reload. And the monthly maintenance fee, well, you’re stuck with that monthly, unless you use the card frequently enough to have it waived. But after all is said and done, even though there’s no such thing as a free debit card, you’ll find that the best reloadable debit card will cost you far, far less than the average credit card.
Oh and I forgot to mention that you can choose to stop using your debit card any time you want to. Simply spend down your balance and throw it away if you so desire. You won’t incur another fee. Try doing that with a credit card and you’ll just see the interest and fees keep on coming.
Where Can You Buy Prepaid Debit Cards?
So where (and how) do you buy a reloadable debit card in the first place? There are actually two main ways. You can buy a prepaid debit card online or at a store. In the first case, you can go online to any prepaid card company’s website and order a card for delivery in one or two weeks. Or you can go to a local retail outlet that sells prepaid debit cards and pick up a card immediately. Most drug store chains for instance have a display section in their stores for gift cards and the like where you can buy a prepaid Visa or MasterCard. They’re pretty easy to find. Note that there’s no real difference between online reloadable debit cards or the store-bought versions, just purchase convenience and speed of delivery.
When you order online, the shiny new debit card you receive in the mail is personalized just for you. It will have your name embossed right on the front and it will have the Visa or MasterCard logo. At that point, you load it up with money and off you go (more on reloading prepaid cards below).
If you purchase a debit card at your local retailer, you not only buy the debit card but you load it up with money at the same time – some minimum amount like $20.00 is all you need. The card you receive in the package is a temporary card. It won’t have your name on it but it will still have the MasterCard of Visa logo. You can use it until you’ve spent all of the money on it or you can order a permanent, personalized card over the phone or online to replace it.
How to Load a Debit Card
After you’ve spent down the balance on your stored value card, you can reload it in a number of ways. Most prepaid card companies have “reload packs” you can buy and use to add money to a prepaid card. Some companies also allow you to actually load cash on the debit card with an electronic “swipe” through a card reader at a local retailer. The best prepaid card companies will also allow automatic deposits directly to your prepaid card from a payroll or annuity – this technique is called a “direct deposit reload.”
The reload packs are a little inconvenient in that you must take cash to a store, purchase the pack (purchase price and cash reload), and then go home and have the money transferred onto your card via a phone call or an Internet visit. The swipe reloads are more convenient but you still must take cash down to the store. The easiest of all by far is the direct deposit method. You have a little bit of paperwork to do up front, but every reload to your card after that is automatic. And you can cancel it easily at any time.
Tracking Your Spending
Keeping track of your spending with a reloadable debit card is extremely easy. Virtually all companies have a website that you can reach from any connected PC where you can dial up your account and view all of your spending and fees quickly. Most companies will also have a phone system you can use to do almost the same thing – though you should watch out for fees that might be associated with that method. Some of the larger companies will also send you automatic account alerts to your email and even directly to your cell phone.
So there’s really no excuse for not knowing how much money you have left on your card – and how much you can spend. This can help you greatly at budget time too as you figure out exactly where you’re spending your money. That helps you hone and smooth out your budget and spending habits.
Wrapping Up
Reloadable prepaid debit cards are a great vehicle to help you control your spending. They behave sort of like an electronic wallet because they allow you to use your cash through various electronic means. Since the cards are prepaid, there’s no real danger that you can push yourself any further into debt than you already are. And if you find yourself deeply in debt, you can use these types of cards to work your way out of it and back into the land of the debt-free. It’s time we all started spending the money we have and not the credit that costs us so much extra. Reloadable debit cards are the way to go.
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Use Prepaid Debit Cards