Prepaid Card Vs. Debit Card: How Do They Stack Up?

When you're trying to stick to a budget, any trick that might help you curb your spending habits seems worth trying. Prepaid cards may look like an easy solution. You can only spend as much as you put in, so there's a built-in limit. On top of that, if you're sick of dealing with bank fees they can be used as an alternative to banking. Where's the downside?

Prepaid cards aren't as straightforward as they seem. They can quickly turn into a much worse deal than sticking with the debit card tied to your checking account.

Bankrate took a look at the top 18 prepaid cards on the market and found several ways they compared unfavorably to traditional banking:

  • All 18 charge fees of some sort.

  • Two-thirds have monthly maintenance fees, often charged whether or not a card is used during the month.

  • On average, the monthly fees come to nearly $10.

  • Being a relatively new addition to the banking market, there's still very little official consumer protection for prepaid cards.

  • The fees they charge are complicated and often unexpected. You can be charged for simple actions like activating your card, adding money to your card, taking cash out at an ATM, and checking your balance online.

Tied to checking accounts, debit cards do often come with some banking fees, but with most accounts these are relatively upfront and easy to understand. The monthly banking fees at the big banks do come out to a little less than $10 as with the prepaid cards, but with community banks and credit unions the average is closer to $6 a month. (And many community institutions offer free accounts with no monthly fees, like all of our Kasasa accounts.)

As obnoxious as many banking fees are, at least banks won't penalize you for basic, necessary functions like putting more money into your account or checking your balance online. You can check your account as often as you need, without having to pay extra for the privilege.

In general, debit cards are a better deal than prepaid cards, but if you head to a bank that offers free Kasasa checking accounts the difference is even more notable.

Kasasa checking accounts:

  • Have no monthly maintenance fees at all.

  • Provide ATM refunds,* so you won't be charged for taking out cash.

  • Offer a variety of rewards for meeting a few easy qualifications.

  • Reward you for actions like adding money to your account via direct deposit, using your debit card, and checking your account online.

Saving money shouldn't have to cost you extra. Where prepaid cards and some debit cards saddle you with endless fees for using and saving your own cash, the community banks and credit unions that offer Kasasa would rather reward you for the same actions. Read more about free Kasasa accounts on our homepage.


*Qualifications, limits, and other requirements apply. See financial institution for details.

Tags: Credit Cards, Rewards Banking