Shop Canada's Best Prepaid Credit Cards

Prepaid Credit Cards

It is always more convenient to have as much money available to you whenever it’s needed. Reloadable prepaid cards allow you to have that convenience as you can deposit money to your card so you can use it for travel and purchases anywhere. More Canadians are adopting prepaid cards as a payment tool, with one study citing a 17% growth in the open-loop prepaid market between 2015 and 2016. This increase is understandable given how easy prepaid credit cards are to access and the fact that they allow you some amount of financial control. There are many benefits of using such cards.

What Are Prepaid Credit Cards and What Are Their Benefits?

A prepaid credit card looks similar to a regular credit card but differs given the fact it does not have a credit line. It sounds more like a debit card but isn't attached to a chequing account as a debit card is.  

You can start using a prepaid card once you have loaded it with your money at your local financial institution or the store where you got it. You can also use an electronic transfer to add money to the card. Not all cards are reloadable, as some prepaid card versions (like a gift card) don't allow you to continue adding funds. Your card will bear the same information a debit or credit card would have, including the card issuer, a card number, and signature strip on the back.   

The most significant benefit you can associate with prepaid credit cards, as mentioned, is convenience. You need not worry if you don't have a chequing account as you don't require one to own a prepaid card. You can deposit your paycheck straight to the card or use it to automate your child's allowance for the month. You don't require a credit history to qualify and having a poor credit score won't deter the card issuer from approving your request for one.

You can use prepaid cards anywhere major credit cards are accepted, and they don't contain overdraft fees. These cards help you to manage recreational spending and limit any budget concerns you may have. You can use them at your supermarket, the mall, or anywhere else where you make everyday purchases.   

How Do Prepaid Cards Work?

As you're using your prepaid Visa or MasterCard, the purchase amounts you rack up are deducted from your balance. As long as you have a balance on your card, you can use it whenever and wherever you feel like. However, once you've spent your balance, you cannot use your card again until you reload it with more money. Ways to reload your card are expanding, as you can transfer funds from your PayPal account or load it at your nearest Wal-Mart. You can either repay your purchases with monthly installments or do so all at once. Furthermore, you can issue payments via electronic check provided by the card issuer or do cash withdrawals from an ATM using a special PIN number.

Given that you don’t need a bank account to use this card, you don’t need to fret about late payments, finance charges, or a credit score. However, with the responsibility and ease that these cards allow you also comes risk. There may be no interest rates to worry about, but the fees associated with prepaid cards aren't always disclosed, which is something that's mandatory with credit cards.

You have to pay a fee to set up the card, and there are also charges for reloading it. Those fees can be limited depending on if you keep a minimum balance or signed up for direct deposit. Some cards charge for additional benefits such as automated bill payments and use overseas. However, some offer you relief when it comes to foreign currency conversion. Annual fees for prepaid credit cards are either very low or non-existent.

Before choosing a prepaid card, read the terms and conditions to ensure the money you're loading on the card isn't being eaten up by fees you didn't bargain for.

How Do You Decide What Type of Prepaid Card to Get?

Following up on the points made about fees, choose a card that has no annual fee, so you're not dealing with upfront costs diminishing your balance. You should also select one that offers you as much protection as possible. Much like some secured credit cards, you can get zero liability protection with prepaid cards to guard you against unauthorized transactions. Whenever you report that someone has stolen a card, or that it's simply lost, your original card balance is restored and you'll get a new card soon enough.

Look at where you can make your purchases. While you can use them at many stores and participating outlets, not everyone will take them, depending on the card provider. Most will accept a prepaid MasterCard and Visa, but some won't take American Express. More stores are offering incentives tied to these cards, so it helps to cash in on these or cash out as some offer cash back on purchases.

Get the card that best suits your priorities. If you're travelling on a regular basis and like to do your shopping overseas, you can get a card and load it with several currencies. You can also get a free international withdrawal and do global e-commerce, among other things, with the card. If you're getting one just because you don't like carrying cash around, that's fine too.

There's no credit check required because you're not borrowing money from the bank. Getting one depends on you, your financial needs, your willingness to deal with the fees that come with it, and your ability to keep reloading it. The fees are unavoidable, with usage charges ranging from below $5 to close to $25 each month. Choose your prepaid card and maintain it with all these factors in mind as you want one for more than benefits, but for security and reliable money management as well.

At shoptherate.ca, you can assess the best prepaid credit cards in Canada and decide which one suits your need. Start comparing now!