There are many types of prepaid cards you can apply for. The term “prepaid” refers to paying for something before you have it. Generally, when this term is used in conjunction with some type of card, it’s almost like having credit. However, prepaid debit cards are a little different to prepaid credit cards.
A typical debit card is issued by retailers, other vendors, or more often, banks. These little plastic cards enable you to use your account almost as if the bank was ‘loaning’ you money – it just comes out of your bank account. It allows you to pull cash out of your account from anywhere you can swipe a card, and you can also check the balance remaining in your account. Every time you spend money, either by withdrawing or by buying something, the money is taken from an account at the bank, or a prepaid amount on the debit card.
With prepaid debit cards, you are buying a debit card with a set amount. Prepaid debit cards have a line of credit that is the same as the mass amount on deposit with the company on the card, making it a “pre-funded” instead of borrowed way to spend. For example, if you spend $20 on a prepaid debit card, you will have $20 on that card (unless the institution you purchased it from charges a fee). Instead of money being taken out of an account somewhere in a bank, every time you make a purchase or take money “out”, it will be taken directly from the balance on the prepaid card. There is a data strip on the back of the card that reads information to the computer, when swiped through the machine, and it shows how much you have left on your prepaid debit card. You can “reload” your card, (that is, put more money on it to spend) at the same place you bought it, some retailers, a few check cashing places, and certain kinds of kiosks.
Debit cards and prepaid debit cards are different from the cards that banks give just for withdrawing your money out of an ATM (automatic teller machine). Debit cards and prepaid debit cards don’t require a PIN (personal identification number) to use the funding on the balance, or in the account, unless the user is trying to withdraw money from an ATM. Another very good reason people like debit cards or prepaid debit cards is that they don’t require or run a credit check on the applicant – so even those with destroyed credit can normally get one. This way, they have a way to easily access their money without extremely high interest rates.
Debit cards and prepaid debit cards have the “Visa” or “Mastercard” logos on them to ensure they can work in almost every way a normal credit card can be used. Visa and Mastercard began placing their logos on these types of cards in the late 1980s.
Perhaps the greatest thing about these cards is that they help you control your spending. You absolutely cannot overspend; therefore you can’t go into debt, and you can’t bring fees and charges down on you to cost an arm and a leg. How’s that for smart?
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