What is a prepaid card?


Quick Answer

A prepaid card resembles a debit or credit card, however, this type of payment card is loaded with cash at a major retailer. These cards are used to make purchases similar to debit or credit cards, however, the price is deducted solely from the available amount loaded to the card.

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Full Answer

A prepaid card has a 16 digit card number, company branding and a signature strip on the back, similar to a debit or credit card. However, unlike those types of cards, prepaid cards do not offer a line of credit and are not linked to an established bank account that offers overdraft protection. The amount of money loaded to the card is the available balance for purchases. The user can only spend the amount loaded to the card, and purchases that cost more than the available balance require an additional form of payment such as cash or another card.

There are several types of prepaid cards available that can be used for different reasons. Prepaid cards are available as gift cards, travel cards and daily expense cards. Prepaid cards generally have monthly fees, transactions fees and reloading fees. For some users, the benefit of using a prepaid card is that the card can be safer and more convenient than carrying cash.

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