Pros and Cons of Prepaid Cards

card15Prepaid payment cards are getting very popular, and there are many variants to choose from. Before you choose a card, you’d do well to check out the pros and cons of cards provided from different companies. It’s also good to have an idea of how prepaid cards hold up against more traditional alternatives for payment. Compare the fees, the benefits and the options you’ll have with each card provider, and use that information to try to figure out which card is going to be the best fit for you.


First of all, a prepaid card looks and acts almost exactly like a traditional credit or debit card, and you’ll be able to use it pretty much the same way. However, because you deposit a given sum to this card before using it, there is no credit limit based on your financial history, and the amount available on your card is entirely up to you.

This also means that even if you have some issues regarding credit, you’ll still be able to get a payment card that is easy to use. As mentioned above, conditions may vary, but most cards will not allow you to use more money than you have deposited, and thus you don’t have the option of making expensive overdrafts. Because the money on the card is already paid, you also avoid the interests that build up on a credit card.

Summing up the pros of using a prepaid card we can make a quick list:

  • Can be used online and over the phone as well as in physical stores, similar to credit and debit cards connected to bank accounts
  • Can be used for withdrawing money from ATMs
  • Safer than carrying around large amounts of cash
  • Fraud protection, in that no personal information or account information is stored on the card
  • Theft protection, in that only the limited amount on the card will be available, as well as the option of closing the card in the case of theft


If you are trying to build up a good credit history, a prepaid card will not help you in this respect. These cards also have some limitations compared to credit and debit cards, and this is especially true for car rental agencies and hotels, as they often do not approve prepaid cards as a form of payment. Other cons are often connected to fees:

  • Fees for depositing money and using the card, depending on card type and provider
  • Some prepaid cards have high fees both for opening and maintaining the account
  • Fewer billing and fraud protections than credit cards (but, as mentioned, less information stored on the card)
  • Can in some cases be more expensive than using an ATM card with a checking account