Prepaid Debit Card Limits Explained

Prepaid debt cards are not debt mechanisms like credit cards. The company issuing the card is not loaning the money. Instead, the person who wishes to use the card actually places the money on deposit with the institution. The card is loaded to this amount. Once the money is spent, the prepaid card can no longer be used.

Activating a Prepaid Card

To activate a prepaid debit card, you have to select the company you would like to use and provide the cash. You should be aware the process is not free. You will pay an activation fee in addition to the limit sum. Since the debit card is not a credit card and no debt is issued, the application process to obtain the card is very short. Your credit history will not be considered. However, the institution will want to assure you have a legal right to own the card in the United States, for example there are not warrants for your arrest, before issuing the card and doing business with you.

Reloading a Prepaid Card

Once you have exhausted the limits on your prepaid debit card, it will no longer be active for your use. With a credit card, you can pay down some of the balance and start spending again. With a prepaid card, however, you will need to go through the process of reloading cash onto the card. You may have another fee in order to do this. The fees should be minimal, but they can add up if you are constantly reloading the card. It is better to add as much as you reasonably can at one time if you know you will need the sum in the future.

What is the Maximum Amount?

Different institutions will have different limits either on a total or daily basis. Having a daily expense limit helps to ensure you do not overcharge the card by spending more than the limits before the transactions have a chance to process. On the whole, however, these cards will have a very high potential limit for you to take advantage of.

Drawbacks of a Prepaid Card

Prepaid cards have fees to activate and use the card. The key advantage with regular credit cards is that in exchange for the interest you pay, you get to make purchases on loaned money. This means you can expand your liquidity by using a credit card instead of a prepaid debit card. When you use loaned funds effectively on your credit card, you will also find your credit score will go up.

A prepaid card will never help nor hurt your credit score. If you are trying to use the card to build credit, then, you will need to use an actual credit card with some amount of loaned money in order to gain the benefits you are looking for.

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