Pay-as-you-go debit cards are also known as prepaid debit cards. The card owner can deposit money onto the card account to use later. After loading money onto the card, the amount can be spent through card transactions at retailers or online stores. The cards themselves look just like credit or debit cards, but the main difference is that you are spending your own money stored in a card account, not a line of credit or money from a separate bank account.
People enjoy pay-as-you-go cards for their convenience and because they don’t add to debt. You can only spend the funds you’ve already deposited onto the card.
Pay-as-you-go debit card features
The prepaid pay-as-you-go card is easy to get. You don’t need to have good credit or even have a credit check at all. Even people without any checking or savings accounts can sign up for one. Some people even have their paychecks paid out to a debit card rather than getting a check or bank deposit.
These cards are versatile and can be used anywhere credit and debit cards are used — even in countries outside the U.S. When you want to add more money to your account, you can do so in minutes.
Benefits of pay-as-you-go debit cards
People who can’t or don’t want to get a traditional bank account often choose to get pay-as-you-go cards, but they are also used by people who use other cards. Pay-as-you-go cards offer many advantages, including:
- Financial control and budget management — Every purchase made gets tracked in account activity, so there are no surprises. It’s easy to track spending and know where every penny goes. Because you can’t spend more than you have, the cards can be great tools for getting and staying out of debt.
- Enhanced security — These cards are backed by the major card companies and offer many of the same protections as credit cards, including account monitoring and zero fraud liability. If your card becomes lost or stolen, you generally aren’t responsible for purchases you didn’t make. Pay-as-you-go cards offer the same chip reader technology and secure online account management tools as other types of cards.
- Convenience and flexibility in managing funds — Pick how much money you add to your card, and do it when it fits your schedule. These cards usually come with convenient loading tools that help you add money any time of the day or night.
Comparison with traditional debit cards
While pay-as-you-go cards and regular debit cards look and feel like the same thing, they have some important differences.
- Pay-as-you-go cards don’t require you to keep a minimum amount on the card. If the balance gets to $0, that’s OK. You can’t buy anything with the card, but you won’t have to pay a fee. Debit card accounts often have rules about how low the balance can get, and you may be charged fees for not keeping enough money in the account.
- Spending more money than you have with a debit card can result in an overdraft — and a high fee. Pay-as-you-go cards only allow you to spend what you have. If you don’t have the cash to cover a purchase, it won’t go through. You won’t be charged for the attempt.
- Pay-as-you-go accounts are incredibly simple to manage and maintain. You spend what you have and add more money when you need to. You can use as much or as little as you want without ever having to set foot in a bank. Debit cards are an ongoing relationship with a bank and require you to open and maintain accounts with that bank.
- Traditional debit cards may not have limits on how much you can add to the account. However, pay-as-you-go cards may only let you load so much at a time. For those who often make very large purchases, the pay-as-you-go card may be limiting.
Best practices for using pay-as-you-go debit cards
Pay-as-you-go cards work best when you understand how they can benefit you. These tips can also help you get the most out of them.
- Keep tabs on your accounts. Regularly monitor account balances so that you always know how much you have to spend. Review your transaction history so that you can catch any unauthorized purchases.
- Use direct deposit and online features. By learning all the digital tools available, you can save time and make it easier to move money to your card when needed — no matter where you are.
- Opt for cards with low fees and additional rewards. Not all pay-as-you-go cards have the same benefits. By picking a card with low fees, you keep more of your own money. Some cards even come with bonuses or reward points to help you make more with every purchase.
- Keep things secure. Treat your pay-as-you-go card like any other card. Don’t give it to others to use or share your account numbers and password. If you lose your card, report it right away, and only use ATMs and gas station pumps that don’t appear to be tampered with. When loading the card or checking online accounts, use a secure Wi-Fi network or your cellular data plan.
Are pay-as-you-go cards for you?
Pay-as-you-go cards are incredibly accessible and give those without traditional bank accounts a way to pay at retailers everywhere. However, they also have uses for other types of consumers. For example, new students can use them to learn budgeting and online banking skills, and travelers may find them a secure way to pay for things on the road. Others like them for paycheck deposits that easily fund grocery and gas purchases throughout the month.
Whatever reason you have for a pay-as-you-go card, research what’s available before making your choice. They don’t all work the same, but the right one will offer low fees and a secure online account experience that’s easy to start using right away. You can read more about pay-as-you-go card and prepaid cards on here.
