Prepaid Debit Cards: 5 People They Benefit

Erin El Issa
By Erin El Issa 

Many or all of the products featured here are from our partners who compensate us. This influences which products we write about and where and how the product appears on a page. However, this does not influence our evaluations. Our opinions are our own. Here is a list of our partners and here's how we make money.

We’ve extolled the benefits of secured credit cards over prepaid cards because of their credit-building abilities, but prepaid debit cards do have their place. Those who don’t need credit, can’t legally obtain credit or shouldn’t have credit may want to consider a low-fee prepaid card. Here are five people who may benefit from a prepaid debit card.

1. Your teenage child

If you want to give your teenager money to spend, you could load up a prepaid debit card. Many prepaid cards give you access to the spending activity, so this is ideal for parents who want to keep tabs on their kids’ spending. You can load your kid’s allowance or monthly spending budget onto the card online. This is convenient in the case of emergency, since you can login to add more money to your child’s account if he should need it in a pinch while you aren’t around.

2. An elderly parent you’re financially supporting

If you’re financially supporting your parents, or managing their finances in their old age, you may want to give them prepaid cards for spending purposes. This is especially convenient if you don’t live near them, because you can reload their cards online. Many elderly people no longer have the need to build and maintain credit — they may live in paid-off homes they don’t intend to leave and they don’t typically make large enough purchases to require a loan.

3. Someone who isn’t living in the United States legally

If you don’t have a valid visa, green card or citizenship in the United States, you might not be able to obtain a credit card — secured or unsecured — because you lack a Social Security number. For online purchases and to keep from carrying large amounts of cash, it may be a good idea to have a prepaid card. Prepaid cards don’t require a Social Security number and can be opened by almost anyone.

4. Someone without a bank account

If you don’t have a bank account, a prepaid card is a much better option than putting your money under your mattress or carrying wads of cash wherever you go. However, we suggest you get a bank account, if possible. Prepaid card fees may exceed any fees charged by your bank for unmet minimum balances. Plus, if you shop around, you can find smaller banks without fees. Check out our guide on finding a free checking account.

5. Someone who was denied for a secured card

If you’re unable to get approved for a credit card — secured or unsecured — a prepaid card can provide you with a payment method when cash isn’t cutting it. Keep in mind, building good credit is necessary for most people, so you may want to ask a loved one to add you as an authorized user on her card to improve your credit, instead. Make sure you don’t abuse someone else’s account, though. Use it solely to build a good enough credit score to qualify for your own card.

The takeaway: Prepaid cards don’t help you build credit, but they are useful for some people. You can give them to a teenager or elderly parent you’re financially supporting to help control spending. They’re also good options for those without a Social Security number or a bank account, or anyone who can’t get a secured credit card.

On a similar note...
Get more smart money moves – straight to your inbox
Sign up and we’ll send you Nerdy articles about the money topics that matter most to you along with other ways to help you get more from your money.