A prepaid card is one of the most important payment cards. That makes it necessary to consider certain factors before acquiring one. One such aspect is the type and amount of fees that the card attracts.
Below is a beginner’s guide to prepaid cards, with a special emphasis on the associated fees.
What Is A Prepaid Card?
A prepaid card, also known as a stored-value card (SVC), is a card that’s functionally similar to debit cards. However, the two differ primarily in how they’re funded.
A prepaid card has a monetary value stored on the card itself as opposed to an external account maintained by a bank or other financial institution. Unlike debit cards that require network access by the payment collection terminals while making purchases, stored-value cards do not demand such access. The cardholder can seamlessly deposit money to or withdraw funds straight from the card.
Prepaid cards are reliable in locations with limited network access. These range from public transport systems to parking machines closed payment systems (such as within workplaces and airplanes), etc.
Anonymity is another noteworthy feature of stored-value cards. These cards do not always disclose the holder’s information at the payment collection terminals. That makes them particularly popular with tourists and other anonymous shoppers.
Prepaid cards are also highly disposable. Although users can top up the cards to maintain their purchasing power, these cards are typically disposed of when the stored value is used up.
Now, there are numerous prepaid card companies, including Visa. A prepaid Visa card offer all the benefits associated with prepaid cards in general. These cards help control spending by ensuring you can only use the amount loaded into them.
Besides, Visa is the world’s second-largest card payment company. Visa-issued prepaid cards are acceptable in over 200 countries and territories worldwide.
What Fees Do Prepaid Cards Charge?
Most (if not all) prepaid card companies charge some fee for using the card. Many of these companies also levy fees simply for holding the card.
As you might expect, the amount of fees a prepaid card attracts varies considerably depending on how you use the card. That underscores the importance of defining your needs before obtaining these cards.
Consider how you intend to use a prepaid card and then compare the services against the average fees levied. That way, you can determine if holding the card is a financially sound decision.
Below are the common fees charged by prepaid cards;
1. Monthly Maintenance Fees
Nearly all prepaid cards charge a monthly maintenance fee simply for being a cardholder. This fee is automatically debited from your account balance. The card company may notify you whenever your account incurs a monthly maintenance fee, depending on whether you’re set for notifications.
However, your prepaid card company may waive the monthly fee or charge discounted rates under certain special circumstances. Common scenarios include if you frequently transact with the card or if you receive your salaries directly through your prepaid card.
2. Transaction Fees
While it’s possible to find prepaid cards that don’t impose monthly maintenance fees, transaction fees are mandatory. These fees are incurred whenever the cardholder uses the card for purchases.
Many prepaid cards charge transaction fees based on a pay-as-you-go model, where you pay a commission that’s commensurate with your purchasing amount. Others have fixed transaction fees.
3. Cash Reload Fees
Prepaid cards are typically loaded at partner retail locations. The money charged by these outlets for topping up the card is what constitutes cash reload fees.
One way to bypass cash reload fees is to top up your prepaid card directly.
4. In-network/Out-of-Network ATM Withdrawal Fee
It’s not always that your prepaid card’s issuing bank and/or ATM belong in the same network.
Withdrawing from an in-network ATM generally attracts lesser (or no fees) than withdrawing from out-of-network ATMs.
5. Balance Inquiry Fees
Prepaid card account balance is typically checked at a partner ATM or by calling customer service. Many companies will charge a fee for that.
Fortunately, balance inquiry fees are usually negligible. Besides, many prepaid card companies provide at least one free option to check your account balance per day.
How you check your balance (whether by text, email, or online) may also determine the balance inquiry fees levied on your prepaid card. Therefore, be sure to check your cardholder agreement before applying for these cards.
6. Paper Statement Fee
Banks charge a significant fee when you request a paper statement compared to obtaining a mini statement from the ATM. The same concept applies to many prepaid card companies.
However, unless the statement is required for other official purposes (such as a federal investigation), you can always access your most recent card purchases for free or for a negligible fee.
The following are other types of fees that may be levied on your prepaid card;
- Decline fees – Charged when you try to spend more than your card’s value
- Inactivity fees – Charged for reactivating dormant accounts
- Card replacement fees – Charged for replacing a lost, stolen, or damaged prepaid card
- Card-to-card transfer fees – Charged when you transfer money between different prepaid cards
- Card cancellation fees – This is typically the balance kept by the prepaid card company when you stop using the card
There are numerous fees levied by prepaid card companies. Therefore, conducting some due diligence while scouting around for a prepaid card is vital. You should focus primarily on the fees charged as well as factors like acceptability and security.