Choose the right card for your situation

There are different types of prepaid cards. You can make the best choice about which card is right for you when you understand key differences.

An open-loop prepaid card is a card with a network logo on it. Examples of networks are Visa, MasterCard, American Express, and Discover. These cards can be used at any location that accepts that brand. Most prepaid cards have a network logo on them.

A closed-loop prepaid card is a card you can only use at certain locations. For example, a closed loop card might be good only at a specific store or group of stores, or on your public transportation system. Most closed-loop cards do not have a network logo on them.

A reloadable prepaid card is a card you can add more money to. This type of card is sometimes called a General Purpose Reloadable Card, or GPR Card. Some cards start out as non-reloadable, but can be reloaded once you complete a registration process. Some prepaid cards are “non-reloadable,” meaning you can’t add more money to them.

A payroll card is a prepaid card you get from your employer that you receive your paycheck on. 

A government benefit card is a prepaid card used by a government agency to pay certain government benefits, such as unemployment insurance. 

Some college ID cards are also prepaid cards. Some colleges offer a “closed-loop” card, which you can only use to pay for things on campus. Other schools offer an “open-loop” card, which you can use at any retail location that accepts that network brand.

Read the information about the card carefully to understand all of the fees. For some types of cards, important information is included on or inside the card package. Consider how you plan to use the card and shop for the best deal.

There are different types of fees a card might charge. Some of the activity your card provider might charge you for includes: 

• Monthly usage
  
• Transaction fee
  
• Account or card reload
  
• Bill payment
  
• ATM withdrawal 
  
• Balance inquiry
  
• Additional card 
  
• Inactivity 
  
• Stop payment 
  
• Lost or stolen card replacement 
  
• Card cancellation 
  

Not every card charges each type of fee. Some cards charge a monthly fee but not per- transaction fees. Other cards may skip the monthly fee but charge you transaction fees each time you use the card.

Read more about types of fees

You may have different protections for fraud or errors, depending on the prepaid card you choose. With some cards, such as payroll cards, you have legal rights to get your money back after unauthorized charges or errors. For other types of cards, you might get protection if the card provider chooses to offer it. Check your cardholder agreement to find out about your specific card’s terms and conditions. Effective October 1, 2017, the CFPB’s new rule will extend new legal protections to most prepaid cards.

Your rights to recover money taken from your prepaid card account depend on what type of card it is, what your contract promises, and how quickly you report the loss after you discover it. Also, reporting the loss or wrong charge right away can help to stop additional losses from your account. Network-branded prepaid card providers usually give some protections for loss or theft, but you should check your card provider’s website or your cardholder agreement to find out the specifics.

If your card is a payroll card or a certain type of government benefit card, or if you receive federal payments onto your card, you may have certain error resolution rights that protect you from unauthorized transactions under federal law. You likely have the protections provided by the networks as well.

Call your card issuer right away if your card or PIN is lost or stolen or if you see unauthorized charges.

A prepaid card may or may not not be the right choice for you, depending on how you plan to use the card. You may want to consider alternatives, such as a bank account.

Prepaid cards vs. debit cards:

A prepaid card is very different from a bank account debit card. A bank account debit card is linked to your checking account. A prepaid card is not linked to a checking account. Instead, you are spending money you loaded onto the prepaid card in advance.

In most cases, you can’t spend more money than you have already loaded onto your prepaid card. Overspending can occur with a checking account for some types of uses, and with a bank account debit card if you have “opted in” to your bank’s overdraft program. This means that your bank may charge you a fee for covering the cost of a purchase or ATM withdrawal that exceeds what you have in your account. Your bank will also require you to repay the overdraft.

In addition, right now prepaid cards may have fewer consumer protections than debit cards, such as those that apply if the card is lost, stolen, or other unauthorized charges appear. The CFPB has issued a rule requiring all prepaid cards to offer these protections, but that rule starts on October 1, 2017. 

Prepaid cards vs. credit cards:

Prepaid cards are very different from credit cards.  This can be confusing because both types of cards may have a card network logo like Visa, MasterCard, American Express, or Discover on them. When you use a credit card, you are borrowing money. Generally, when you use a prepaid card, you are spending money you loaded onto the card in advance.