4 Times It Makes Sense to Use a Prepaid Credit Card

Updated - First published on Dec. 4, 2018

Elizabeth Aldrich

By: Elizabeth Aldrich

Many or all of the products here are from our partners that compensate us. It’s how we make money. But our editorial integrity ensures our experts’ opinions aren’t influenced by compensation. Terms may apply to offers listed on this page.

Image source: Getty Images

Prepaid credit cards often fall forgotten behind debit cards and credit cards. A lot of this probably has to do with the fees associated with them.

You get charged for loading and reloading a prepaid card as well as withdrawing money through an ATM. Some even charge monthly service fees. On top of that, prepaid cards don’t fall under the same regulations as debit and credit cards, so historically, they haven’t had to disclose their fees as clearly as their more regulated counterparts. Luckily, the Consumer Financial Protection Bureau did recently extend regulations requiring prepaid cards to disclose their fees in a more upfront manner.

Despite these drawbacks, there are a number of circumstances in which using a prepaid credit card makes a lot of sense.

1. For creative budgeting help

The foundation of a good budget lies in separating out your costs carefully, setting realistic spending limits, and then sticking to them. You might have heard about the popular cash-in-envelope budgeting method, which works by letting you spend only cash which you split up into different envelopes labeled for different expenses, such as “groceries” and “entertainment.” When you leave the house, you take only one envelope with you depending on the errand you’re running, and you spend only what’s inside of it. No card allowed.

Prepaid cards allow you to do this without having to deal with taking out and carrying around a bunch of cash. Get several different prepaid cards, label them each with a spending category, and only load them up with your monthly or weekly allowance in that spending category. When you go to the grocery store, only take your “groceries” card, and leave the rest at home.

2. For international travel

Carrying a lot of cash while you’re abroad is risky business, as there’s almost no recourse if you happen to be robbed. While travel credit cards offer great protections and rewards, some are worried about giving thieves access to a high credit limit. A stolen debit card, on the other hand, gives them access to your bank account.

Featured offer: save money while you pay off debt with one of these top-rated balance transfer credit cards

That’s why prepaid cards can be a great option for people who are worried about traveling with cash, credit, or debit. If a prepaid card is stolen, they’re only getting the amount of money that’s loaded onto it, nothing else. Furthermore, they can’t get access to your personal information. Travel-specific prepaid cards will even let you load multiple currencies onto the same card, saving you money on exchange fees. Make sure to check the foreign transaction fees and ATM fees before using a prepaid card abroad.

3. To give money to your kids

This is one of the most popular ways to use prepaid credit cards. They’re a great way to give your kids an allowance or emergency fund without having them carry around a bunch of cash. They won’t have to deal with the responsibility of owning a checking account or the risks of credit card debt. This also prevents parents from having to open up joint bank accounts or co-sign with their children, which can impact their credit.

It’s particularly common for parents to use prepaid cards to give their kids occasional money when they’re away at college. That being said, once your student is an adult, you should consider getting them a real bank account and perhaps even a low limit credit card or a student credit card. This will help them build responsible financial habits and a credit score early on.

4. When you can’t get a bank account

Finally, if you’re unable to open a checking account, a prepaid card is a solid alternative. You don’t have to have a great credit score to open a bank account -- in fact, some banks don’t even check your credit score and instead require a minimum deposit.

What they will check is your ChexSystems report, which details your history with checking accounts from banks and credit unions. Any seriously delinquent marks, such as unpaid negative balances, abuse of overdraft privileges, and evidence of fraud, make it difficult, if not impossible, to open a new checking account. This is also the case for people who have joint accounts with someone who left the account unpaid. In these instances, prepaid cards may be the only way to access non-cash payment methods.

Alert: highest cash back card we've seen now has 0% intro APR until 2025

If you're using the wrong credit or debit card, it could be costing you serious money. Our experts love this top pick, which features a 0% intro APR for 15 months, an insane cash back rate of up to 5%, and all somehow for no annual fee. 

In fact, this card is so good that our experts even use it personally. Click here to read our full review for free and apply in just 2 minutes. 

Read our free review

Our Research Expert

Elizabeth Aldrich
Elizabeth Aldrich icon-button-linkedin-2x icon-button-twitter-2x

Elizabeth is a writer specializing in credit cards, debt repayment, and small business. Her work has also appeared on MSN Money, Yahoo! Finance, and Business Insider.

Related Articles

View All Articles Learn More Link Arrow
If You Have a Wells Fargo Savings Account, You Should Switch ASAP. Here's Why
Steven Porrello

By: Steven Porrello | Updated - First published on Nov. 7, 2023

These days, storing your savings in a Wells Fargo account pretty much serves one purpose: Quick access to cash at brick-and-mortar banks or ATMs. But if you have savings you're not spending anytime soon, a Wells Fargo Way2Save Savings account ranks high in the worst places to keep your savings. No offense if Wells Fargo is your favorite bank, but it's time to stop leaving money on the table. Here's why. Wells Fargo can't compare to today's top high-yield savings accounts As of writing this, the Wells Fargo Way2Save Savings account has a 0.15% APY, which is not only lower than the national average (0.60%) but also several times lower than today's top-paying savings accounts. At 0.15%, you'll earn about $15 annually for every $10,000 you save. Not exactly the most exciting reward for saving money. By comparison, many of today's top-paying savings accounts have rates above 5%. Case in point: the Western Alliance Bank High-Yield Savings Account via Raisin. This account has a mouth-watering APY of 5.26%, no fees, and a low opening deposit of $1. At that APY, you'll earn $526 for every $10,000 you save. That's 35 times more than the $15 you would have earned in your Wells Fargo Way2Save Savings account. Of course, the major benefit of the Wells Fargo Way2Save Savings account is that you can access your savings at Wells Fargo branches or via ATMs. That's important if you withdraw cash frequently, as online banks will make you transfer the money electronically to an account with ATM access. But even if accessing cash is important to you, there are still better options than the Wells Fargo Way2Save Savings. For example, the SoFi Checking and Savings account gives you a cash back debit card and access to over 55,000-plus fee-free ATMs. Plus, it has a decent APY of up to 4.60%. That's not the highest APY I've seen, but it's not bad for an account that combines checking and savings into one. What about the Wells Fargo Platinum Savings account?Now, the Wells Fargo Platinum Savings account does have a compelling offer right now. New savings customers can lock into a promotional APY of 4.62% when they sign up for a new Wells Fargo Platinum Savings account before Jan. 9, 2024, and maintain a daily minimum balance of $10,000. The emphasis there is on "new." According to the fine print, this offer is for new savings customers who don't currently have a Wells Fargo savings account -- whether that's Wells Fargo Platinum Savings or the Wells Fargo Way2Save Savings. So if you're already a Wells Fargo client, the bank will likely assign you the account's regular APY, which ranges from 0.25% to 2.51%, depending on balance.Again, if you're saving money at Wells Fargo, there's no question about it -- you're missing out on higher interest rates. You may have good reasons for using Wells Fargo, such as having greater access to your savings. But if you're fine with online banking, then trust me -- you deserve better than a rock-bottom APY. Take a look at today's top-paying savings accounts and see how much more you could be earning for your savings. 
Have a Chase Savings Account? You're Probably Missing Out on $400-Plus per Year
Steven Porrello

By: Steven Porrello | Updated - First published on Nov. 24, 2023

Chase is the largest bank in the U.S., and one of the largest in the world. It has over 4,700 brick-and-mortar locations, more than 15,000 ATMs, and around a couple trillion in bank deposits. But for all this banking power, there's one thing Chase doesn't have: a savings account that can compete in today's high-rate environment. Seems as if a big bank like Chase would have at least one savings account that earned high interest, right? Truth is, banks lose money when they pay high interest rates and will forgo offering them if they don't need to attract customers. As the largest bank in the U.S., Chase is doing just fine and doesn't need high rates to bring in more deposits. But that leaves Chase clients in a bit of a conundrum. Just how much money are you missing out by keeping it in a savings account at Chase? Well, when you start to crunch the numbers, it can be a lot. The average American is probably missing out on $400 per year Today's most competitive rates on savings accounts are sitting at a two-decade high of about 5.25%. Most of these savings accounts are through the company Raisin, which is essentially a marketplace for finding high-yield savings and CDs. Last I checked, the highest rate on Raisin was 5.30% on a Customers Bank High-Yield Savings Account, followed by both VyStar Credit Union and DR Bank at 5.29%. How much could you make on 5.30%? According to a recent survey of U.S. Family Finances by the Federal Reserve, the median savings in 2022 was about $8,000. If you saved $8,000 in the Customers Bank High-Yield Savings Account powered by Raisin, you would earn about $424 within a year. In contrast, a Chase Savings Account pays out at a rock-bottom APY of 0.01%. At that rate, it's almost pointless to do the math but if you like your copper Abes, you'd make about $0.80 on $8,000 in 12 months.When is a Chase savings account worth it? I'm not going to lie -- I have a Chase account. I don't keep a lot of money in it, but I do keep some. The reason is that I live four blocks from the Chase bank in downtown Portland and like the security of having some money within reach. When I need to withdraw cash (rare but it happens), I can just go in person and use the ATM. And when I need to deposit cash -- birthday money, thanks Mom -- I can do it without jumping through hoops. If you want banking convenience like this, a high-yield savings account through Raisin or any other online bank will likely frustrate you. Raisin is a case in point: When you deposit money in a Raisin-powered account, you transfer it from an external account (which could be a savings account at Chase) into a service bank (Lewis & Clark Bank), which is then transferred into a custodial account at the bank account of your choice (a Customers Bank High-Yield Savings Account or a Western Alliance Bank High-Yield Savings Account, for example). If you want to withdraw this money, you have to transfer it back to your external account, which could take a few business days. For those who need cash fast, each nail-biting day might make that high yield not worth the stress. So you might have to diversify. Truthfully, it's best to keep a little money within easy access for emergencies, but not so much that you miss out on today's high rates. If you've engorged your Chase Savings Account, take a look at some other top-paying savings accounts to see how much you could earn in interest. If your savings is anywhere near the median -- $8,000 -- you could potentially pick up at least $400 on your savings. 
Are CDs a Good Investment for 2024?
Steven Porrello

By: Steven Porrello | Updated - First published on Nov. 28, 2023

Certificates of deposit (CDs) offer high guaranteed returns in exchange for locking your money up at a bank or credit union for a term that you choose. While lackluster in previous years, CD rates have taken off in 2023, aided in large part by the Federal Reserve's continued interest rate hikes. These days, it's not rare to find a short-term CD paying out at a rate above 5%, with some paying out as high as 5.70%.With only a few weeks left in 2023, many of these CDs look like good investments going into the new year. But are they? If you're thinking about investing in one soon, let's take a look at what we know.Short-term CDs could make great investments, but don't ignore longer termsRight now, you can find the highest rates on short-term CDs, like those ranging from three to 18 months. For example, on Raisin's CD marketplace, all the CDs paying above 5% are within that short-term range.This isn't a coincidence. Rather, it reflects the expectation that interest rates will fall sometime in the future. Banks want to keep their CD rates competitive, but if they're paying 5.70% for five years, they could end up losing money.If your goal is to earn interest at a high rate, a short-term CD could be a good investment, especially if you're hesitant to lock into a longer term. Now might even be the best time to build out a CD ladder, combining short and long terms to stretch out today's high rates for longer periods.That said, I wouldn't ignore long-term CDs on the grounds that their rates are lower today. It's possible the Fed could start reversing course in 2024, hiking down rates to a more sustainable level. If that holds true, today's short term CDs could very well mature at a time when CD rates are much lower. You might lock into a 5.70% CD for six months, but a 4-year CD at 4.50% could freeze an elevated rate for a few years longer.A no-penalty CD could make a good investmentA major problem with CDs is that they come with early withdrawal penalties. These penalties are often equal to a few months worth of interest, though some could be as high as six to 12 months. If you withdraw from your CD before your term is up, you'll pay this penalty, which could sometimes result in you losing money.One way around this is to get a no-penalty CD. These CDs typically have a very brief no-withdrawal period, usually seven days or less, after which you can liquidate your CD account with no penalty. Traditionally, no-penalty CDs have low interest rates compared with regular CDs with the same term. But in today's high rate environment, you could easily pick up a no-penalty CD with an APY above 5%.For example, Raisin has several no-penalty CDs on its marketplace. As of writing this, the highest paying no-penalty CD comes from Greenwood Credit Union with a 5.37% APY and 12-month term. Other close contenders include Technology Credit Union (5.36%, five-month term) and Mission Valley Bank (5.35%, three-month term).What's great about these CDs is that you could break your contract to capture a different APY or longer term at a later date. Let's say, for instance, that the Fed indicates it's going to start lowering interest rates in 2024. You decide you're going to lock into a 4% rate on a 3-year CD. If you have your money tied up in a no-penalty CD, you could easily navigate out of the contract and open a new CD account. Likewise, if you have emergency savings, a no-penalty CD could help you earn at a higher interest rate, though I would recommend you consider a high-yield savings account first.Will CD rates stay elevated in 2024?CD rates are at a two-decade high, but they won't stay this high for much longer. Once the Fed feels confident inflation is under control, it won't be long before rates start to fall. I'd say if you're in the market for a CD, now is a great time to lock into one of today's top paying CDs. Take a look at different terms and see how much interest you could earn in 2024.
Does Your Income Make You Upper Class, Middle Class, or Lower Class?
Christy Bieber

By: Christy Bieber | Updated - First published on Sept. 5, 2023

Incomes vary widely across the United States, with some people making many times the amount that others earn. If you've ever wondered how your personal finances stack up, and what "class" your income officially puts you in, here's what you need to know.What income do you need to be upper, middle, or lower class?Based on 2021 data, here's what you would need to earn in order to be in each class:Lower class: This is defined as the bottom 20% of earners. Those in the lower class have an income at or below $28,007.Lower middle class: This is defined as individuals in the 20th to 40th percentile of household income. Earnings among this group are between $28,008 and $55,000Middle class: The middle class is officially those whose earnings put them in the 40th to 60th percentile of household income. The income range is $55,001 to $89,744.Upper middle class: Anyone with earnings in the 60th to 80th percentile would be considered upper middle class. Those in the upper middle class have incomes between $89,745 and $149,131.Upper class: Finally, the upper class is the top 20% of earners and they have incomes of $149,132 or higher.Take a look at these numbers and see where you fall based on your own earnings. And remember, this is a snapshot in time -- your earnings can change throughout your life, and so can your class designation.Will your success be determined by your income and class?It's probably not a surprise that those in the upper classes or in the upper middle class do have a higher net worth than those in the lower class or the lower middle class. But the disparity is greater than you might think. While the median net worth of those with incomes of $149,132 or higher is $805,400, the median net worth of those in the lower class is just $12,000.Your income impacts how easy it is for you to build wealth. If you make more money, it is easier to save it and invest it in a brokerage account where it can work for you. If you make less money, then you may struggle even to cover the necessities out of your checking account, much less to buy valuable assets that help you grow richer over time.But that doesn't mean people who don't make a lot of money can't be a financial success. A lot depends on what you do with the money you actually have, including how much you spend and how much you save.There are plenty of people who make over $100,000 a year who live paycheck to paycheck, and plenty of people with incomes that put them squarely in the lower or lower middle class who have diligently saved and grown quite wealthy over many years.Here's how you can improve your standingDon't be discouraged if you aren't in the class you hope to be. For one thing, you have opportunities to increase your income by taking the following steps:Learning new job skills: You could obtain a certification, take part in a management training program at work, or take some classes to develop skills that may help you get promoted (such as computer training courses or public speaking classes), depending on your industry.Take on a side hustle: The average side hustle brings in $483 per month, which is a good amount of extra money that could make a meaningful difference in your income.Work some extra hours: If your company allows you to work overtime, take advantage of it, as many people are paid time and a half for overtime hours.Negotiate your salary: According to Pew Research, when workers negotiated for higher pay, 28% said they received the extra money they asked for and 38% indicated they were given more than originally offered but less than their ask. Whether you are getting a new job or staying at your current job but feel you're underpaid, it doesn't hurt to make a request for more money -- especially if you can find salary data to back up the fact that others in your industry are paid more.And even if your earnings never put you in the top 20% of earners, you can still have a rich life and end up with the financial security you deserve -- especially if you prioritize saving as much as you can for as long as you can.
The 5 Best Men's Gifts to Buy at Sam's Club
Dana George

By: Dana George | Updated - First published on Nov. 26, 2023

If you're going to pick up a sweet deal from Sam's Club this holiday season, you're going to want to order it online, as many of the items featured in its catalog are not available in all stores. And if you're going to shop for, purchase, and wrap a gift, you want it to be "just right." Here are five gift ideas for the special men in your life that may fit the bill without totally draining your checking account. Prices are accurate at time of writing, but are subject to change.1. The Ninja Woodfire™ Outdoor Grill & Smoker: $300Why we like it: This grill and smoker may be small enough to sit on a picnic table, but it packs a powerful punch. You achieve all the performance of a full-size grill (including the char and searing) without the space-gobbling size of a large grill. If you know someone who's interested in smoking meats, all this foolproof system requires is 1/2 cup of wood pellets. Electronically powered with 120 Volts, it carries a 1-year limited warranty. Oh, and it's also priced $170 lower than the same model at Walmart. That's an extra $170 to put toward something less fun, like homeowners insurance.2. Chef iQ Smart Thermometer 3 Probe + Hub: $150Why we like it: This Smart Thermometer takes the guesswork out of grilling. If a man in your life considers himself quite the gourmet chef, he's going to love having such a sophisticated thermometer at his fingertips. Chef iQ uses an advanced algorithm to calculate the precise cooking time and temperatures, getting the meat just right every time. The fact that the probe is ultra-thin means meat is left intact and better able to hold in the juices. If you were to buy it on Amazon, you would pay $30 more.3. ProForm 25 lbs. Select-a-Weight Dumbbell Set: $30Why we like it: What's great about this dumbbell set is the revolutionary Easy-Adjust Weight Selection system. It takes just a moment for the user to modify the weight so their time can be better spent working out. The durable steel set stays secure in a storage tray that clearly shows the total weight of the dumbbell at each adjustment. A similar set goes for $100 on Amazon.4. Lee Men's Workwear Vest: $20Why we like it: If you haven't shopped for men's garments at Sam's Club lately, you might be surprised to learn how many brands the warehouse carries. This vest manages to look tough and stylish at the same time and comes in three colors: tobacco, black, and chocolate. If you're interested, you might want to pick one up while sizes small to xxx-large are still available.5. MSI 31.5" FHD Curved 250 Hz 1ms FreeSync Gaming Monitor: $199Why we like it: The FreeSync Gaming Monitor is built with a speedy 250 hz refresh rate + 1ms response time VA LED panel. It's great for fast-paced games like racing, sports, and fights. In short, if a game requires fast movements, this monitor can handle it. In addition to a multi-monitor 180-degree set-up, your gamer is sure to appreciate the way it syncs the refresh rate of the monitor with their GPU to eliminate the irritation of stuttering.As we're all looking for ways to save money this holiday season, it's good to know that Sam's Club has a wide selection of gift ideas at a reasonable price.
View All Articles Learn More Link Arrow