How do you know whether or not a prepaid card is for you? The answer might be easier than you think. Let’s run through the decision-making process to determine if a prepaid card is better than a bank account.
Things to Think About
Proximity – Your location relative to banking centers is a key input to your decision. Prepaid cards can be funded online, or through retail point of sale locations at popular grocery stores, pharmacies, and gas stations. These same locations often carry fee-to-use ATMs for customers who use their prepaid cards for a transaction. In many cases, you’ll be closer to a prepaid access point than you will be to your own bank.
Direct deposit – If you get a direct deposit from an employer, you’ll receive lower fees and expenses on your prepaid cards. In this case, it makes especially good sense to open a prepaid card rather than a high-fee checking account. A prepaid card will be automatically loaded with your net pay immediately after your direct deposit clears – usually midnight on pay day.
History – Banking and credit history is a big factor to whether or not you can open a traditional checking account. However, prepaid cards are usually much more open in their acceptance terms, making it easier for people with less than perfect history to open an account.
Card use – How often, where, and how you use a prepaid card is also important. Those who use a prepaid card for point of sale transactions will avoid most of the fees on a prepaid card. Those who intend to make several ATM transactions or balance checks at an ATM might be better to use a traditional bank. Always check the fee schedule for fees on different transactions, as they vary from card to card and bank to bank.
Minimum balance – Prepaid cards often have no minimum balance requirement. Bank checking accounts, however, charge larger monthly fees of up to $15 on customer accounts that keep less than the minimum balance in their account. Minimum balances on traditional checking and savings accounts range from $100-$1,000.