A reloadable debit card is not associated with an interest earning checking account, but enables cardholders to “load” money onto the card through methods like direct deposit, bank transfers, through some retail outlets and mobile check deposit. Cardholders can spend up to the value placed on their card in stores, online, over the phone and by mail order. Many card issuers provide FDIC insurance and purchase protection. Cardholders can withdraw money from an ATM, pay bills online, and access other features through their website or mobile app.
Reloadable Debit Card Features
Unlike a traditional debit card that most shoppers get when they open a checking account, reloadable debit cards don’t necessarily have to be opened through a financial institution. Although many banks and credit unions offer reloadable debit cards, they can also be purchased through many retail stores (i.e. Walmart, CVS, and Walgreens). They can serve as a good alternative or even an accessory to a traditional checking account because they share many characteristics. Similar to checking accounts, reloadable debit cards:
Are accepted everywhere.
Reloadable debit cards are affiliated with large credit card networks like MasterCard, American Express, and Visa, just like bank-style debit cards. Cardholders can make purchases on their card in stores, online, over the phone and by mail order.
Offer direct deposit.
Just as banks let their account holders set up direct deposit to their checking accounts, reloadable cards issuers allow customers to set up a direct deposit to their reloadable debit card. Cardholders can link their paycheck and/or government issued checks to their reloadable card usually at no charge.
Can be used to withdraw cash from ATMs.
In addition to being used as a way to pay at retailers, reloadable cards can also be used to withdraw money from ATMs. Many cards belong to a surcharge-free ATM network, enabling cardholders to withdraw cash at no charge from designated ATMs. National banks that offer these cards also allow cardholders to use take advantage of their large ATM networks without having to pay a fee (e.g. Chase). Keep in mind that most reloadable cards incur ATM fees when using an ATM outside of the designated network.
Provide online and mobile access.
Just like using a bank’s online banking platform and mobile application, reloadable cards provide their customers with the ability to bank virtually. Card holders can check their balances and transaction history, pay bills, make transfers online. Some issuers even let card holders reload their cards by depositing checks on their smartphone.
Disadvantages of Reloadable Debit Cards
While reloadable debit cards hold many redeeming qualities that allow them serve as a useful alternative to a checking account or credit card, they also have some drawbacks that consumers should be aware of. Reloadable debit cards:
Come with unexpected fees.
Some reloadable debit cards come with extra fees that many consumers are unaware of. Charges that come with reloadable debit cards are: enrollment fees, standard monthly fees, ATM usage fees, and reloading fees. Please keep in mind that not all reloadable cards charge these fees.
Have spending, withdrawal, and loading limits.
There may be shortcomings based on restrictions of individual card offers. Some cards (but not all) put daily thresholds on the amount of money that can hold. Some cards put a daily limit on how much money can be spent and like some checking account debit cards; many reloadable debit cards also limit the amount of cash that cardholders can withdrawal daily.
Are useless for credit building.
Reloadable debit cards are great for people with bad credit, but having one will have no effect on your credit score. If you’re looking for a card that will improve your credit score, reloadable debit cards are not the answer. Instead, you may wish to consider looking into a secured credit card, a credit card that helps build credit for consumers with no or poor credit.
Who are Reloadable Debit Cards Right For?
Reloadable debit cards serve as a safe alternative to cash, they are easy to access, and they provide consumers with a lot of the same functionality that traditional bank accounts offer. These key factors are why they appeal to many different types of consumers. Reloadable cards can benefit:
Consumers who already have a banking relationship.
Whether you’re traveling abroad or just want an accessory to your existing bank accounts, reloadable debit cards serve as a safe alternative to cash. Cardholders can use them to make purchases, withdraw money from ATMs, and have easy online access to monitor their accounts.
Younger consumers.
Reloadable debit cards are a safe option to young consumers, in particular students, who don’t have an existing banking relationship, but require a payment method outside of cash. In addition, they can be an entryway into learning financial responsibility. Parents can promote financial awareness because they have the ability to control their child’s spending by limiting the amount of funds on the card and by monitoring spending through online and mobile access.
Those with no or poor credit.
Enrolling in a reloadable card doesn’t require a credit check. This makes them an ideal substitute for those with poor credit who are unable to enroll in a checking account. Since reloadable debit cards offer many of the same features that checking accounts provide, like ATM access and Direct Deposit, they make for a great substitute for those who are unable to obtain a checking account at a financial institution.
| Institution | Account Name |
|---|---|
| BB&T | Prepaid Debit Card |
| Dollar Bank | No Overdraft Checking |
| First Commonwealth Bank | SmartPay Card |