Personal Finance

What Is A Prepaid Check

By David Krug David Krug is the CEO & President of Bankovia. He's a lifelong expat who has lived in the Philippines, Mexico, Thailand, and Colombia. When he's not reading about cryptocurrencies, he's researching the latest personal finance software. 6 minute read

Consider the advantages and disadvantages of prepaid debit cards and checking accounts, as well as your own financial circumstances, before making a decision. Choosing between a checking account and a prepaid debit card is a key step in developing a sound financial strategy. A prepaid debit card may likewise be a mystery to you.

Prepaid debit cards and checking accounts both have their advantages and disadvantages, and it’s up to you which one is best for your scenario. Here’s everything you need to know to make the proper choice if you’re unsure.

How do prepaid debit cards work?

Even if there are some distinctions, a prepaid debit card works much like a standard debit card. In the first place, there’s no need for a checking account to use a prepaid card. When it comes to accounts, though, the card is the key. You’re limited to using the money you put on the card, and you can’t do things like create checks or wire funds as you can with a bank account. Fortunately, reloadable prepaid debit cards from Visa, MasterCard, and American Express are readily accessible and frequently used.

It’s also important to note that when you apply for a prepaid debit card, your financial history is not taken into account. Hence, a prepaid card might be an ideal choice if you’ve been denied a bank account in the past.

Depending on the card, you may be able to reload money into your account in a variety of ways. Some examples of these are direct deposit, bank transfers, PayPal transfers, and cash refills. Some reload choices may not be free, and costs may vary depending on your card issuer, so be aware of this before you proceed.

Prepaid debit cards and secured credit cards are not the same thing. Secured cards need only a single upfront payment to guarantee your credit limit. Once you’ve reached your credit limit, you may use your card as much as you like, pay it off, and then start spending again. A prepaid card isn’t the same as spending the money on it and then needing to reload. It’s also worth noting that the usage of secured credit cards can help you enhance your credit rating, whereas the use of prepaid debit cards does not.


Prepaid debit cards can be used in a variety of ways, and yours may differ from someone else’s. Prepaid cards provide the following advantages:

  • Using a debit card as a budgeting tool is a terrific approach to avoid overspending since you can only spend the money you’ve placed onto your card. It’s possible to set up many accounts on a prepaid card, each of which can be linked to a separate card. For example, this might make it easier for you to budget for various expenditure categories or to assign precise amounts of spending to your family members.
  • Less chance of going over your credit limit. Overdraft protection is available on certain prepaid debit cards, although not all of them (unlike with checking accounts) provide it. It means you are less likely to be charged a penalty fee for overdrawing your account.
  • There will be no background check on your financial history: Prepaid debit card issuers don’t care if you’ve had issues with your bank accounts in the past. Because you’re not using a credit card to acquire a line of credit, there isn’t a credit check.


Despite the fact that a prepaid debit card may sound like a good fit for your scenario, you should also be aware of the drawbacks of prepaid cards:

  • Some prepaid cards are better than others, but many of them carry a huge list of costs. Examples include a monthly cost, an inactivity fee, a transaction fee, a fee on all ATM withdrawals, a cash reload fee, and many more. When applying for a prepaid debit card, be sure to read the tiny print.
  • Features that are less: Prepaid debit cards don’t have the same functionality as standard debit cards. For example, you may not be able to withdraw cash from your local bank or credit union without incurring a service charge. As for ATM fees, it’s not always the case that prepaid debit cards have fee-free ATM networks.
  • Banks can’t be rebuilt from the ground up: Because of your bank account history, you may be unable to open a standard checking account. If this is the case, you may want to consider a prepaid debit card instead. Instead of a traditional checking account, you might want to look into a second-chance checking account.

How do checking accounts work?

To keep your money safe while yet allowing you to access it when necessary, you need a checking account. Direct deposit, check or cash deposits, bank transfers, and more are all options for depositing money into your account.

When you open a checking account, you’ll receive a debit card, which you can use to make purchases or withdrawals from an ATM. You can also use your checking account to send money to other people via transfers, paper checks, and more.

No credit history is built with a checking account, but your transactions will appear on your ChexSystems report just as with a prepaid debit card. This report documents your history with checking and savings accounts, and it is something many of the best banks check before approving you for an account. You may build a solid financial history if you manage your checking account sensibly.


Here are a few advantages of having a checking account over a prepaid debit card:

  • In many cases, banks waive their monthly fees for customers who satisfy particular criteria. The cost-free ATM network and the fact that you’ll virtually always be able to use your debit card without fear of incurring a fee are just two of the many advantages of banking with a credit union.
  • You can earn interest on some checking accounts. Most checking accounts don’t pay much interest, but there are a few online banks that pay a lot of interest on checking balances.
  • Features that aren’t included here: If you have a checking account, you can accomplish things that aren’t feasible with a pre-loaded debit card. Having a bank account can help you establish your credit history, which is required by some lenders before they would accept you for a loan or credit card.


Having a checking account is generally a good idea. However, the following factors might make it more difficult or less enticing to obtain approved:

  • Negative entries on your ChexSystems report may make it more difficult to get authorized for a regular checking account, lowering your chances of success. Second-chance choices are available, but many of them are pricey and lack a wide range of capabilities. In addition, if you do not have a Social Security number, you may have difficulty obtaining one.
  • With fewer tools for budgeting The budgeting advice and tools offered by certain banks and credit unions may be generic. It’s not the same as using a prepaid card because you can’t create as many sub-accounts for different types of spending as you can with a prepaid card.
  • Overdraft protection can be costly: Consumer Financial Protection Bureau estimates that financial institutions charge billions of dollars in overdraft fees every year, and overdraft protection is a basic feature of checking accounts. Every time you overdraw your account, you risk being hit with a penalty fee if you aren’t careful.

Choosing between a debit card and a checking account might be confusing

A prepaid debit card or a checking account is a personal financial decision that is heavily influenced by your present financial status and your long-term financial objectives. Checking accounts are preferable than prepaid debit cards in the majority of cases. For those who cannot be accepted because of insufficient documentation, including but not limited to proof of income or creditworthiness, this may not be a possibility.

For those who don’t meet the requirements for a traditional checking account, a prepaid debit card may be a viable option. Prepaid cards have fewer features and higher costs, whereas checking accounts are free to open and offer a variety of services. In other words, if you want to do your banking the old-fashioned way, open a checking account.

It’s also worth thinking whether or not you should combine the two and get the most out of each. As an example, having both a prepaid debit card and a checking account may be the ideal option if you enjoy the budgeting capabilities of the card but don’t want to give up the other typical bank account advantages. Consider your choices in terms of both cost and features as you weigh the pros and negatives of each option.

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