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What is a prepaid card?
Prepaid cards are cards that can be loaded with cash prior to making purchases in-store or online; they differ from debit cards in that you are not drawing on savings or transaction account, but rather spending money that you have loaded onto the card. You can typically reload the card with funds and there will be minimum and maximum load limits that apply.
Some prepaid cards are designed for travel and allow you to load multiple currencies onto the card and lock in your exchange rates at the time of loading. These are also known as travel money cards. Most prepaid cards are issued by Visa or Mastercard, so the cards can generally be used in-store or online wherever Visa or Mastercard is accepted.
How do prepaid cards work?
Although they’re often called ‘prepaid credit cards’, they are not actually credit cards. Prepaid cards don’t offer a line of credit or allow you to borrow money. With a prepaid card, you can only spend what is loaded onto the card. You also are not charged interest and your credit score won’t be impacted by the card. Because of this, prepaid cards are more similar to debit cards.
Are prepaid cards and debit cards the same?
Prepaid cards work in a similar way to debit cards, but they are not the same. Unlike debit cards, you don’t need a linked transaction account to get a prepaid card. With prepaid cards, you load money onto the card. You usually do this via a bank transfer, BPAY or debit card, or in person with the card issuer. With debit cards, funds are taken from your transaction account when you use your card.
How can I get a prepaid card?
You can obtain a prepaid card online or by visiting a physical store or bank branch. Eligibility requirements for a prepaid card can potentially include:
- Minimum age requirements. Some cards may require you to be a certain age.
- ID information. Typically, you will need to provide personal details including your name, age, residential address, date of birth and contact number when getting a prepaid card.
- Initial load amount. Some prepaid cards will require you to load a minimum amount of money onto them in order to activate them.
If you apply in person, you may receive your card straight away. Otherwise, you may expect to receive it in the mail after 5-10 business days.
What types of prepaid cards are available?
There are a few different types of prepaid cards:
- Everyday prepaid cards are designed for everyday spending and budgeting. Many cards also allow tap-and-go payments. Since you can only spend what is on the card, the idea is that they could help you manage your money.
- Travel prepaid cards allow you to load multiple currencies onto the card and lock in the exchange rate at the time you load your currency. This allows you to avoid currency conversion fees when travelling overseas. Visa and Mastercard prepaid cards can be used overseas, wherever they are accepted. Many cards are also compatible with tap-and-go payments. Some cards come with additional perks like the ability to earn frequent flyer points or access to free Wi-Fi.
- Gift prepaid cards allow you to choose the amount you load onto the card and then give it to someone as a gift. The recipient of the card can then use it in-store or online, wherever the card is accepted. The card cannot be reloaded.
What are the benefits of prepaid cards?
Depending on the type of prepaid card you choose, benefits could include:
- The ability to load multiple currencies to your card and lock in the exchange rates before you travel.
- Using the card in-store and online with a range of retailers (wherever Visa or Mastercard is accepted).
- Security against loss, theft or fraud. Visa and Mastercard both offer global emergency assistance if your card has been stolen or lost.
- Other benefits. The ability to earn frequent flyer points or access to free Wi-Fi.
What are the drawbacks of prepaid cards?
But there are also drawbacks to be aware of, including:
- Being charged a number of fees. This may include a one-off purchase fee, reload fees, ATM fees, foreign currency conversion fees, inactivity fees and cash-out fees
- Card limits. A minimum and maximum amount of money you can load onto the card may be a condition.
What is the best reloadable prepaid card in Australia?
The ‘best’ reloadable prepaid card will depend on what features you are after and the fees charged. When comparing prepaid cards, consider factors like:
- Reload fees. Prepaid cards often have some free-fee reloading options but can charge reloading fees in other circumstances. For example, it might be free to reload through a bank transfer, but a fee may apply for reloading via a debit card.
- Other fees. Check whether you’ll be charged any other fees. Common ones include a purchase fee, ATM fees, currency conversion fees, inactivity fees and cash-out fees.
- Supported currencies. If you are intending to use a travel prepaid card, check whether the currencies you need are supported as well as the exchange rate on offer.
- Load limits. Prepaid cards often have minimum and maximum load limits. Check whether this is appropriate for your spending habits, particularly if there is a reload fee.
- Where and how you can use the card. Visa and Mastercard prepaid cards can be used wherever they are accepted. If you want to make tap-and-go payments, check whether the card is compatible.
- Other benefits on offer. Does the card allow you to earn rewards points or get free Wi-Fi?
Where to buy prepaid debit cards in Australia?
At the time of writing, some places where you can buy a prepaid debit card in Australia, include:
- Travel Money Oz Currency Pass
- Qantas Pay
- Travelex Travel Money Card
- Cash Passport Platinum Mastercard
- Australia Post Everyday Mastercard
- The Wise Card
Canstar does not currently compare everyday prepaid cards or gift prepaid cards, but we do compare prepaid SIM cards. Cards are compared based on fees charged and features on offer.
