Why Choose A Prepaid Card Over A Chequing Account?
A chequing account is the most common and most basic type of bank account: people can pay their bills with it, make purchases, withdraw and deposit money, and receive compensation. However, the rising popularity of prepaid cards is bringing into question whether a chequing account is the best option for everyday payment purposes. Although a chequing account is a great option for banking, a prepaid card offers advantages worth learning about.
No Overdraft or Balance Charges
Since prepaid cards don’t have an overdraft limit, overdraft fees are non-existent. You can only spend the amount that is loaded on the card, and nothing more. You can save more money each month, especially if budgeting is not your strong suit. By contrast, people with chequing accounts often get ensnared by unwanted and unexpected overdraft fees. Chequing accounts also require you to have a minimum balance in the account or a fee will be charged; once the minimum balance is met, the charge is waived. Since there is no minimum balance requirement for prepaid cards, you avoid these charges, no matter how much money you have in your “account”.
Since prepaid cards do not have overdraft options, this forces cardholders to budget better and make wiser spending decisions. Chequing account overdrafts can prevent people from keeping a consistent budget because an overdraft option often invites them to spend more money than Necessary.
No Credit Check for Underbanked Individuals
Banks often request credit reports using services such as ChexSystem, which can hinder people from getting a bank account depending on their financial past. Prepaid cards on the other hand, don’t check your financial history as a requirement for receiving a card. That makes prepaid cards particularly useful for new residents, or anyone else who doesn’t qualify for a bank account. However, they also appeal to many people of all backgrounds and economic levels, regardless of their banking status.
Increased Cardholder Protection
In the case of a lost or stolen card, prepaid cards offer increased protection for the cardholder. Since prepaid cards are affiliated to payment networks such as Visa® and MasterCard®, they include Zero Liability protection. This protection maintains the monetary balance that was on the card when you receive a replacement card. Not all chequing accounts include this type of protection. Plus, a lost or stolen debit card is connected to your bank account, which increases the risk of further loss. Prepaid cards are not connected to a bank account, further protecting assets and personal information.
Prepaid Card Fees and Chequing Fees
The biggest argument for not choosing a prepaid card is that there are fees associated with the card—but, what many people don’t realize is that the same is true of chequing accounts. In fact, the fees are very comparable depending on the bank or the prepaid card provider. According to an article by Time Business Magazine, a prepaid card is cheaper for what they consider to be the “average model customer” (people who are mindful of their money most of the time).
The average model customer would pay around $28 for their chequing account in monthly fees in comparison to $22 for a prepaid card. So yes, prepaid cards do have fees, but so does almost every other option in the market. However, a prepaid card offers a lot of additional benefits, such as the ones described above.
If you want to learn more about prepaid cards, you can read our blog post about prepaid card growth in households and businesses. Or, if you have more specific questions, you can go straight to our contact page to contact one of our prepaid card solutions experts.
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