Prepaid cards, how they work and what they charge

With a prepaid card, you spend money you've already put on the card. It isn't linked to a bank or credit union account. You add money to the card account first, which is called loading it, and then spend it. If you try to spend more than is loaded, the transaction is usually denied, though some prepaid cards allow overdrafts.

How it differs from a debit or credit card

A debit card spends money in your bank or credit union account. A credit card borrows money you repay by the due date. The difference can be confusing, because a prepaid card and a debit card may both show a card network logo.

The fees a card can carry

Most prepaid cards charge fees for holding or using the card, and the types and amounts vary by card. These are the common ones:

• Activation. You pay it when you buy the card, and in a store it may be shown as the price.
• Monthly. It comes out of the balance each month, even if you don't use the card. Some cards waive it with direct deposit.
• Per purchase. You pay it each time you use the card for certain transactions.
• ATM withdrawals. The fee is often lower, or zero, at an in-network ATM.
• Balance inquiry. Some cards charge to check the balance at an ATM or by phone, but most offer at least one free way to check.
• Cash reload. You pay it to add cash, and direct deposit may avoid it.
• Inactivity. Some cards charge it when you don't use the card for a set period.
• Card replacement. Some cards charge it to replace one that's lost, stolen, damaged or expired.

A card sold in a store carries a chart of key fees on the package, and a website address with the full list.

Registering the card

An unregistered card may not let you use some features, such as online purchases or ATMs. You may also have fewer protections if it's lost or stolen. Registering means giving the provider personal information to confirm who you are. It can be a separate step from activating the card.

If it's lost or stolen

Contact the card provider right away if the card or the PIN is lost or stolen, or if you see a charge you didn't make. Save the provider's customer service number in your phone ahead of time.

When it expires

Your cardholder agreement says what happens to money left on an expired card. You may be able to ask for a replacement card, or a check for the balance, possibly for a fee.

An annotated example

What to do next

Register the card with its provider, save the provider's customer service number in your phone, and keep the cardholder agreement where you can find it.