Prepaid Cards Report: Which Card Is Right For You?

The prepaid card market is booming. Consumers are expected to load $353.6 billion per year to them by 2020, according to Mercator Advisory Group. That would mark a 444% increase relative to 2012. And it’s clear why they’ve grown so popular.

Prepaid cards can be a great tool for many different types of people. They’re safer than cash, and they eliminate the threat of overdraft fees and bounced checks that comes with most checking accounts. They also offer guaranteed approval and provide the same functionality as a checking account-debit card combo, just without the physical checkbook. As a result, prepaid cards are well suited to satisfy four major consumer needs:

1. Replacing a checking account
2. Managing a child’s allowance
3. Low-cost check cashing
4. Transfers and other electronic transactions

But prepaid cards vary widely in terms of cost. The average offer includes 10 different fees, which can add up quickly if you choose the wrong card for your needs. Yet the best cards can be free if used wisely. To help you make the right choice, WalletHub’s editors compared 39 of the most popular prepaid cards on the market. We evaluated each based on four hypothetical scenarios designed to reflect common usage habits. You can find the results below.

Some of the cards listed on this page originate from our partners, but that did not impact our conclusions. Offers information was collected on Aug. 28, 2017 and is likely to have changed since.

Key Findings

 

Choose Wisely Or Pay The Price: Each type of prepaid card user has at least one free option available, but choosing the wrong card can cost consumers up to $311 per year.

 

Big-Bank Savings: Prepaid cards from large banks are up to 82% less expensive than their small-bank counterparts.

 

Features Falling Short: Up to 49% of prepaid cards may not be suitable for common consumer needs, due to a lack of necessary features.

 

Few Celebrity Endorsers Survived: Prepaid cards founded or endorsed by celebrities – common in the market’s early days – have largely disappeared, reflecting the market’s maturation.

 

Mostly Falling Costs: “Alternative Check-Cashing Tool” is the only use case for which costs rose significantly relative to 2015 (22.20%). The cost of other use cases fell by an average of 8.52%.

 

2017’s Best Prepaid Cards

The offers below represent the lowest-cost options with all of the necessary features for each use case considered in this report. Our editors also performed a more-qualitative analysis of these cards to further narrow down the field and ultimately determine their picks for Best Overall Prepaid Cards.

Previous Years’ Best Cards:

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Detailed Findings

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Methodology

WalletHub analyzed 39 of the most popular prepaid cards on the market to determine if they offer the features needed by major consumer groups and, if so, how much each would cost to use. This evaluation was based on four distinct scenarios (see below) designed by WalletHub to reflect common usage habits.

If a given card was deemed to lack a key feature needed by one of the major consumer groups, it was disregarded for that usage segment and labeled, “Not Suitable.” In cases of a single card offering multiple usage plans, we compared the most affordable plan for each scenario given that cardholders can immediately change their payment plan with a phone call to customer service. All cost comparisons in the Main Findings section reflect month-to-month payment plans and disregard special discounts and promotions.

The usage scenarios considered in this report are described below.

Scenario 1: Alternative Checking Account

This individual:

• Earns a monthly paycheck of $2,000,
• Can use direct deposit,
• Withdraws cash from the ATM once per week
• Makes five prepaid card purchases per week
• Pays two monthly bills by check using online bill pay (the billers do not accept card payments).

Total Annual Cost = (1X monthly fee +1X paper statement +1X direct deposit card load fee+ 4X ATM withdrawal fee + 20X purchase transaction fee + 2X online bill pay by check fee) X 12

Required Account Features:

• Direct Deposit
• Paper Statement
• Online Bill Pay Via Check

 

Scenario 2: Child’s Allowance

This family gives their teenager a monthly allowance of $100, using their bank account or PayPal. The teenager then:

• Withdraws cash from the ATM twice per month
• Makes two prepaid card purchases per week.

Total Annual Cost = (1X monthly fee +1X paper statement + 1X bank transfer card load fee + 2X ATM withdrawal fee+ 8X purchase transaction fee) X 12

Required Account Features:

• Account cannot be restricted to users who are 18+
• Funds can be loaded via bank account or PayPal (since most parents don’t want to go to the store every time they give their kids an allowance)
• Paper Statement

 

Scenario 3: Alternative Check Cashing Tool
This individual:

• Earns a two monthly paychecks of $800 each
• Cannot use direct deposit
• Must load checks directly to prepaid card
• Withdraws cash from ATMs once per week

Total Annual Cost = (1X monthly fee + 1X paper statement + 4X check reload fee+ 4X ATM withdrawal + 12X purchases) X 12

Required Account Features:

• Ability to load checks directly to prepaid account
• Paper Statement

 

Scenario 4: Access to Electronic Transactions

This person:

• Earns $2,000 per month, paid in cash weekly
• Uses online bill pay two times per month
• Loads $250 to their prepaid card account twice per month
• Makes two prepaid card purchases per week

Total Annual Cost = (1X monthly fee + 2X cash reloads + 0X ATM withdrawals+ 2X electronic online bill pay + 8X purchases) X 12

Required Account Features:

• Ability to deposit cash into prepaid account
• Online Bill Pay

 

Assumptions:
WalletHub used the following assumptions in determining the total cost of each prepaid card usage scenario.

• • ATM Fees: If a prepaid card is associated with a free nationwide network of at least 2,000 ATMs, we assumed the cardholder would be able to avoid ATM fees. This assumption applied to all usage scenarios.
  • Number of Transactions: The number of debit purchases cardholders are expected to make under each scenario were based on usage information from The 2009 Survey of Consumer Payment Choice from the Federal Reserve Bank of Boston. According to this survey, the average debit card user makes roughly 20 purchases each month, and given that Scenario 1 involves an alternative checking account, that was the number used. For Scenario 2, we assumed two purchases per week (8 per month) due to the fact that the child using the card only receives a $100 monthly allowance and will make purchases mostly on weekends. Scenario 3 assumes three purchases per week (12 per month) because consumers in this group are more accustomed to using cash and therefore will not make as many purchases with plastic as cardholders in Scenario 1.The consumer in Scenario 4 gets paid in cash and therefore has no need to withdraw money from ATMs and less reason to use the card for purchases since they can use cash for most purchase transactions. We therefore assumed two purchases per week for this scenario. In addition, some cards charge different fees for signature and PIN transactions, and in those cases we assumed cardholders would make signature transactions because their fees are smaller.
  • Fee Ranges: Where fees were presented as a range between two amounts, we have chosen the lowest amount of the ranged for our cost assessment.
  • One-Time Bonuses: Certain cards offer one-time sign-up bonuses tied to different account services. We did not take these bonuses into account. We did, however, incorporate regular bonuses into the total cost assessment.
  • Interest Rates: We gave credit to cards offering interest earnings by offsetting the total cost of applicable offers in qualifying scenarios. Only the consumers in Scenarios 1 and 3 earn enough to qualify for interest.
  • Rewards: We did not take into account rewards programs that limit earning capabilities only to purchases made at specific retailers, as opposed to any purchase made with the card.
  • Online Bill Pay: We did not consider the ability to input a prepaid card’s account information directly into a payment form on a monthly biller’s website to be online bill pay. Yet consumers should be aware that this is a viable alternative in certain situations.
  • Number of Fees: To determine the total number of fees charged by an issuer, we reviewed fee schedules and customer agreements online and then asked each issuer to confirm the data.

Cash reload fees are often assessed by third-party retail establishments and not by card issuers. As such, we did not include such costs in our calculations of the total number of fees charged by each card.