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Prepaid cards have more in common with gift cards than credit cards. A prepaid card looks like a credit card, but it isn’t actually a credit card. It’s loaded with money at the front end, so instead of spending money and paying it back later, you deposit money initially and spend it later.
You can load a prepaid card with any amount you’d like, and refill it when the balance runs out. Some people use prepaid cards as an alternative to a checking or bank account, in order to avoid bank fees – although prepaid cards come with their own fee schedules. Some of the things you can do with prepaid cards include:
- Paying bills online
- Shopping online
- Making purchases anywhere that major credit cards are accepted
- Getting cash from an ATM
- Getting direct deposits from employers
- Transferring money directly to other payees
Some cards charge fees for all of these actions, some charge for just some of them, and some don’t charge for any of them. Read the terms and conditions carefully when you are considering any prepaid card to find the best one for you.
Prepaid cards are a popular option with parents who might want to give their child a credit card, but don’t want them to get in over their heads in debt because with prepaid cards, when the money is gone, it is gone. They are also popular with people who can’t get a credit card or prefer not to get one, but still want the convenience of paying with plastic.