The Walmart MoneyCard is just one aspect of the superstore’s expansion into the financial arena: it also offers check cashing, bill payments, money orders and tax prep, among others. The retailer also offers two Walmart credit cards targeted towards customers, including the Walmart MoneyCard prepaid debit card.
Look, prepaid debit cards are generally not a good idea. As prepaid debit cards go, it’s one of the best, which goes a long way toward explaining why it’s the country’s most popular choice amongst prepaid users. But that doesn’t mean it’s the best option for you. As they say, the lesser of two evils is still evil. Here’s a look at how Walmart stacks up against the infamous RushCard:
| Walmart MoneyCard | Baby Phat RushCard | |
|---|---|---|
| Activation Fee | $3 | $14.95 |
| Reload Fee | $3 | $0 |
| PIN Transaction Fee | $0 | $1 |
| ATM Fee | $2 | $2.50 (first 2 free each month) |
| Monthly Fee | $3 | $9.95 |
Okay, so the Walmart MoneyCard is nothing compared to the exorbitant fees of the RushCard. But how does it stack up against a regular debit card? You may have heard about Bank of America’s $5 debit usage fee, or the $5-$15 monthly fees most banks are charging on checking accounts. But you can still find many debit cards with no fees whatsoever. Take, say, the PerkStreet debit card:
| Walmart MoneyCard | PerkStreet Debit Card | |
|---|---|---|
| Activation Fee | $3 | $0 |
| Reload Fee | $3 | $0 |
| PIN Transaction Fee | $0 | $0 |
| ATM Fee | $2 | $0 in network |
| Monthly Fee | $3 | $0 |
And we haven’t mentioned the kicker yet: you actually get rewards for using the PerkStreet debit card. You get 2% back of every purchase you make with the card – that’s a lot better than losing money for using it. The Walmart MoneyCard has a big marketing push behind it, but does that mean you should believe them? It’s one of the best prepaid debit cards. But it’s still a prepaid debit card.
| PerkStreet Financial℠ Debit MasterCard® | |||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
  |
| ||||||||||||
| |||||||||||||
We’ve long criticized prepaid debit cards for the laundry list of fees that come with them (for instance the AccountNow and NetSpend cards), and were even fairly vocal about our issues with Amex’s much-hyped prepaid card. Walmart’s golden compared to those, but it’s got nothing on a no-fee, rewards debit card.
What is a prepaid debit card?
Before you go the prepaid route, make sure you understand the pros and cons. First of all, understand that prepaid debit cards are not credit cards. You can’t spend money that you haven ‘t already earned: instead, you load funds onto the card, and once you’ve spent that, you can’t use the card until you reload. They function just like regular debit or ATM cards, or even like gift cards. Because of this, they can’t help you build your credit, because they are not technically a credit line at all.
There is one distinguishing feature between prepaid cards and standard ATM cards: the fees. Even though free checking is scarcer than it was a few years ago, many will still be able to find a checking account without fees, especially if you can make the minimum balance requirement.
Those who can’t meet the minimums, and don’t have free checking accounts as an option should be very careful in choosing a prepaid debit card. Many will charge for things like ATM transactions, adding money to your account, or replacing your card. Some prepaid debit cards, charge for any number of incidentals and can easily suck $15 or more each month. That’s $180 a year for a card that will probably never hold more than $300-500. Few checking accounts charge such fees.
With the Walmart MoneyCard, your best bet is to have your paychecks direct deposited, so that you can make the $1,000 loading threshold each month and avoid the $3 maintenance fee. And if you stick solely to in-store ATMs and never lose your card, you can get by without being charged any fees at all.
The Walmart MoneyCard also offers a minimal rewards program; a feature that’s extremely rare on other prepaid cards. It provides a discount on gas.
The truth about prepaid debit “features”
We’ve pulled the “key features” from the Walmart MoneyCard website, and we want to make sure that applicants understand exactly what they mean before deciding down the prepaid card road.
No credit check: This is always the case with prepaid cards; since it’s your money anyway, there’s no reason for them to check your credit. While this is definitely a plus for anyone who doesn’t qualify for a regular credit card, there are plenty of credit unions who offer secured credit cards, even for those who’ve just come out of bankruptcy or have a low FICO score. Plus the Capital One Cash Rewards for Newcomers credit card is aimed at immigrants who have yet to establish a credit history in the US, and student credit cards abound for younglings without a payment history. Basic checking accounts also almost never care about your creditworthiness, so know that prepaid debit isn’t necessarily your only option.
Get cash from millions of ATMs: The bullet points don’t tell you that there’s a fee for withdrawing cash: $2 per transaction. Plus the bank whose ATM you are using is probably going to charge you a few bucks too. Of course, you aren’t charged this fee at Walmart owned ATMs, but you should keep in mind that many credit unions will reimburse your ATM fees anyway, so withdrawal fees aren’t a given.
Reloadable: Walmart lets you reload your card with cash in-store, but you’ll be charged a $3 fee. Loading with cash anywhere else requires a Green Dot MoneyPak and the cost “varies by retailer.” You can also reload the card by cashing your paycheck, which will waive the $3 reloading fee, but instead you’ll pay $3-6 to get your check cashed. Direct deposit is free. Meanwhile, I don’t know of any checking accounts that charge you for simply depositing money.
Safer than cash/no overdraft fees: Walmart does have a zero-liability policy protecting you against a lost or stolen card, but most banks do the same for their debit cards. And this policy is completely voluntary, it’s not mandated by law as it is with credit and standard debit cards. In addition, overdraft fees became a non-issue after the passage of the CARD Act in 2009. Banks aren’t allowed to charge overdraft fees anymore, unless you proactively “opt in” and tell them its ok, and the bank is required to disclose how much you’ll pay in fees (usually $35).
1% cash back on gas: If rewards are your only goal, there may be better rewards debit cards than this. Even though Chase’s rewards checking program bit the dust, the Target debit card discounts 5% on every Target purchase (which can include clothing, appliances, groceries, basically anything), while credit unions like Lake Michigan Credit Union and Consumers Credit Union of Illinois offer 4% yields on their checking accounts.
Privacy concerns: your information will be sold without your consent
Like many banks, GE Money Bank, which issues the card and fronts the money, collects a significant chunk of your information including your card balances and transaction history. The bank then sells your information to its affiliates (and sometimes others) for marketing purposes. While GE Money is certainly not alone in this practice, many consumers complained of a deluge of marketing materials once they purchased a MoneyCard.
You can control some of the information sharing, though the program is opt-out: unless you specify otherwise, your information will automatically be shared. You can request that the bank not send your information to its affiliates and non-affiliates for marketing purposes, and you can ask that information about your creditworthiness not be sent to affiliates.
The rest, though, you can’t opt out of. The bank can use your information for its own marketing (“to offer our products and services to you”) and for joint marketing with other financial companies. It will also share your information to its affiliates “for everyday business purposes,” though you can prevent it from disclosing your creditworthiness.
You may have other options if you want to build credit
Prepaid debit cards don’t do anything for your credit score. At worst, they’ll report bad news, and at best they won’t report anything. A secured credit card, on the other hand, will help create, or rehabilitate, your credit history. Most credit unions that offer secured cards will do so regardless of your FICO score, and even a few reputable national banks offer options with lower fees and better terms.
The Orchard Bank MasterCard, which is unsecured, is among the most accessible credit cards out there, and doesn’t involve the up-front security deposits of secured cards. Whatever you do, though, don’t waste your time and money on a prepaid debit card.
Use our prepaid card finder to save money and find better deals.