When you’re still establishing a financial life in the US, opening a traditional bank account may not be possible right away. Luckily, reloadable debit cards offer another option for accessing and managing your money that many users find convenient.
At Remitly, we’re committed to helping immigrants confidently manage their finances as they settle into life in the US. In this article, we’ll walk you through everything you need to know about reloadable debit cards and help you decide if they’re a good option for you.
What are reloadable debit cards?
Reloadable debit cards (sometimes called “prepaid debit cards”) are pretty straightforward to use, but many people in the US may not be as familiar with them as traditional debit cards or credit cards. Let’s take a look at what they are, how they’re used, and what sets them apart from other cards.
An overview of reloadable debit cards
Reloadable debit cards work like standard debit cards, but they are not tied to a bank or credit union account. Instead, they’re tied to an account associated with the card, which you can add money to, but this account will not offer the same benefits or options as a typical checking account. Reloadable cards can be loaded with money in a few different ways, but they cannot be overdrawn. Many banks, stores, and cash services offer reloadable debit cards.
Why you may want a reloadable debit card
There are a few reasons why reloadable debit cards may be a good tool for you.
- Budgeting: Reloadable debit cards don’t allow you to spend more than what is in the account, so you’re forced to stick to a budget. If you find yourself overspending, these cards may help you limit yourself to what is available.
- Bank account access: If you are finding it difficult to open a traditional bank account, reloadable debit cards may offer easier access to a card-based payment method.
- Safety: Rather than needing to carry cash everywhere, with a reloadable debit card, you can spend more safely. These cards also come with fraud and liability protections and can be protected through the Federal Deposit Insurance Corporation (FDIC) once properly registered.
How reloadable debit cards differ from other cards
Unlike traditional debit cards, reloadable debit cards are not tied to a checking account. Though they can be issued by banks, they do not come with the same support or services as a checking account. What you get when you are issued a reloadable debit card is simply the card and an account where money can be loaded.
Reloadable cards will also often feature the logos of payment networks like Visa or MasterCard. While these logos may help you determine which ATMs can be used with your reloadable card, this does not mean that they are credit cards. Credit cards allow you to charge the amounts first and pay off those charges later. Conversely, reloadable cards require you to fund your purchases before you make them.
How reloadable debit cards work
Now that we know a bit more about reloadable debit cards, let’s take a look at how they’re actually used. We’ll start with how to put money on the card, how to use it for your day-to-day transactions, and how some prepaid cards can be used to withdraw cash from ATMs.
Loading money onto the card
Different card providers offer different methods to load money onto your card. These methods include:
- Reload packs: You may be able to purchase reload packs at certain retail stores. In this case, you would go to a store and purchase a reload pack, the value of which can be applied to your reloadable debit card account.
- Transfers: While you may not be able to make transfers with a reloadable debit card, you may still be able to receive them. This means that someone with a bank account or certain other reloadable debit cards can send money to your account.
- Direct deposits: Some reloadable debit cards offer the ability to receive direct deposits from your employer. If you’re searching for the right card for you, this can be a helpful feature to have access to.
Making purchases and transactions
Once you have money on your card, you should be able to use it in any situation where your card’s network is accepted. This means that if your reloadable card is supported by the MasterCard network, you can use it wherever MasterCard is accepted. This holds true for online purchases, transactions made over the phone, and ATM withdrawals.
Accessing cash via ATMs
Most reloadable debit cards can be used at ATMs to withdraw cash. If this is an important feature for you, make sure that the card you choose uses an ATM network that is convenient and in your area. There may be fees involved, but some card providers offer ATM usage for free within certain networks.
Benefits of using reloadable debit cards
While they may not be right for everyone, reloadable debit cards have some clear advantages worth considering.
Alternatives to traditional banking
People who are new to the United States may find traditional banks and credit unions out of reach while they are first getting settled into their new home. This may be because you’re waiting on paperwork or because the bank is having trouble identifying you. Reloadable debit cards offer a great way to access the safety and security of card-based payment methods with lower barriers to entry.
Financial control for budget-conscious consumers
You may find yourself in a situation where traditional banking options are available to you, but you’re having trouble sticking to a budget. By putting your money on a reloadable debit card and only carrying that card with you rather than your traditional debit card, you can limit your spending more effectively. Parents may also find this helpful for giving their children access to spending money.
Enhancements like direct deposit and overdraft protection
Many reloadable debit cards today offer the ability to receive direct deposits. These could be from employers or from the government in the form of tax refunds or unemployment payments. If this is an option for your card, instructions on how to set up direct deposit should be included with the information you received when your card was issued. Alternatively, you can contact customer service to find out your routing and account numbers.
While the most basic reloadable debit cards don’t tend to offer it, some offer opt-in overdraft protection—a feature that temporarily covers purchases that exceed your balance. The amount covered will depend on the card, but this can be a useful safety net if you think you may find yourself in a pinch.
Potential drawbacks and considerations
With all that in mind, there are still a few aspects of reloadable debit cards that are important to consider before choosing one.
Monthly fees and associated costs
Reloadable debit card providers need to make money somehow, so there are often several fees associated with their use. The first fee will be the purchase price or activation fee for the card itself. Then, depending on the card there can be either monthly or “per-purchase” fees. Some providers may let you choose the best option for you. There can also be fees for ATMs, fees for depositing cash, and fees for transferring money between reloadable debit card accounts.
While many users find these fees manageable, they can add up, and it’s important to understand exactly what you’re being charged and why. Keeping tabs on these fees means you won’t get caught by surprise.
Potential pitfalls compared to credit and debit cards
With reloadable cards, you’re essentially buying access to a card payment method. As a result, you may not have the same protections and levels of service built into your card that you would with a regular credit card or checking account. This means that users of reloadable debit cards need to be vigilant with their finances to avoid heavier penalties and fees.
Another major difference between reloadable debit cards and credit cards is that you will not be able to build a credit history when using a reloadable debit card. Having a credit history and a strong credit score is key to accessing many financial services in the United States. Secured credit cards are similar in many ways to a reloadable debit card, but with the added bonus of allowing you to start building a credit history.
Choosing a reloadable debit card
Even with those concerns, reloadable debit cards can be a useful and helpful financial tool. If you think that a reloadable debit card is the right option for you, here are some considerations to help you choose one.
Card providers and issuers
Reloadable debit cards are offered by a range of providers, including banks, online money sending services, and financial networks such as American Express and Visa. Retailers like Walmart also offer cards of their own. All of these options make it fairly easy to access your card and begin using it right away.
Understand the terms
Not all reloadable debit cards are equal, so make sure to do your research on the terms of each card option to find the best one for you. Here are a few things to keep in mind when comparing cards:
- Fees: Understand how each card’s fee structure works and compare the amounts for each, especially when it comes to monthly or per-purchase fees, cash loading fees, and ATM fees.
- ATMs: Know which ATM networks the different cards cover and which ones in your area allow you to both withdraw and deposit cash for free.
- Reloading: Decide which reloading method is best for you. This may be reload packs, ATM deposits, or direct deposits. Look at each card option carefully to understand the availability of these methods and the fees associated with them.
Tools and resources for card management
Different cards will have different options for managing your money. As these cards do not have the full functionality of a checking account, your card will likely come with a simple website or app to help you manage your money. This may mean that you’ll need to be more hands-on with your finances, but it can still cover the basic necessities that you need for managing your reloadable debit card.
Reloadable debit cards can be a practical and accessible option for managing your money—especially if you’re new to the U.S. financial system or looking for a way to control spending. Take your time to decide if a reloadable debit card is the right financial tool for your situation. You may also want to look at other banking options or secured credit cards to find what works best for your financial needs.
FAQs
Do you need a bank account for a reloadable Visa card?
No. Bank accounts are not necessary to use a reloadable debit card. Simply add money to your account via direct deposit, online transfers, or with cash at certain retailers.
Can you use a reloadable Visa at an ATM?
Many reloadable Visa cards can be used to withdraw cash at ATMs, but this may not be true for all cards or all ATMs. If ATM access is important for you, make sure to check the ATM policy before signing up for a card. If you already have a reloadable debit card, speak with your card issuer to clarify which ATMs you can use.
What’s the downside of using a prepaid card?
Prepaid or reloadable debit cards won’t have the same level of service as a typical bank account. There can also be many fees associated with them, and they don’t help you build a credit history.