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It can be challenging to navigate your finances without a way to pay for things or get cash out of an ATM. If that sounds like a unique problem to have, it's not: About 7.1 million households in the United States—or 5.4%—don't have a bank or credit union account, according to the most recent data from the Federal Deposit Insurance Corporation (FDIC).
So what do you do if you don't have a bank debit card you can use to make purchases? Thankfully, people without bank accounts can still get a variety of financial services. One popular option is a prepaid debit card. Read on to find out more about prepaid debit cards and whether they might be a good fit for your needs.
Can I Get a Debit Card Without a Bank Account?
To get a traditional debit card, you'd need to choose a bank or other financial institution that offers accounts with debit cards, select the type of account you want, and open and maintain that account with the bank or financial institution.
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Opening an account usually requires showing or sending some form of government-issued identification, filling out paperwork, and sometimes (but not always) depositing a small amount of money to fund the account.
On the other hand, prepaid debit cards don't require you to open an account with a bank. To get a prepaid debit card, you just need to find a place to buy one.
What Is a Prepaid Debit Card?
A prepaid debit card, sometimes called a stored-value card, pay-as-you-go card or reloadable prepaid card is precisely what it sounds like: a card you need to "prepay" to use.
It works like this: You put money on the card, and as you spend it, the money gets subtracted from your balance. After you spend all the money on your card, you have to add more funds to use it again.
Prepaid debit cards function a lot like regular debit cards, but they do have some notable differences. For example, unlike with many traditional bank accounts, you can't overdraw a prepaid card account. Since it's not connected to an account, when you don't have the money to pay for something, the transaction will simply get declined. And like a regular debit card, you can use a prepaid card to make purchases in person or online.
While prepaid debit cards can be helpful if you don't have a back account, they have some drawbacks too:
- Fees: There are often extra charges associated with prepaid cards compared with traditional debit cards. For example, there might be a charge for activating a card, another charge for making deposits and yet another charge each month you have the card. Some cards may charge a fee for every purchase, while others add a fee for international purchases.
- Fewer services: Prepaid cards don't offer many of the benefits of a checking account. For example, it's not a given that you'll have a network of ATMs to use for free with your card. Some prepaid cards are a part of a network like Allpoint or MoneyPass, but some aren't. You also might not have the ability to access online banking or make wire transfers.
- Little protection: Many prepaid debit cards aren't covered by FDIC or NCUA insurance, which means if for some reason the bank that backs the prepaid card fails, the government won't cover your lost money. Some prepaid cards might be eligible for FDIC "pass-through insurance," but they have to meet certain qualifications.
- You can't build credit: When you use your prepaid debit card, your payments don't get reported to the three major credit bureaus (Experian, TransUnion and Equifax). If you're trying to build or repair your credit report, a prepaid debit card might not be the best choice for you.
How Do I Purchase a Prepaid Debit Card?
Getting a prepaid debit card is relatively easy. You can buy them at a variety of stores, including popular retail stores such as Target and Walmart, drugstores and pharmacies. You can also buy prepaid debit cards online; if you go this route, you may be issued a virtual card or receive a physical card in the mail in several days or longer.
Some banks and other financial services companies offer prepaid debit cards, including those focused on underserved communities. Options include Bluebird, Chime and Visa.
Compare card services and fees on different prepaid cards to help you decide which one you want. Once you buy the card, you'll have to register it by providing personal information such as your name and address, phone number, birth date and Social Security number or other government-issued ID number.
After registering the card, you'll need to preload it with money. If you don't have a bank account, you have a few options for this: You can either add money to the card at a store or bank, buy a "reload pack" to add a certain amount to your card, or get funds directly deposited from an employer.
The Bottom Line
Prepaid debit cards are a convenient way to make purchases without carrying cash or opening a traditional bank account. The best prepaid debit card options offer low or no fees and the convenience of being reloadable at any time.
If you're looking for an alternative to a debit or prepaid card that can help build or repair your credit, consider a secured credit card. While you'll need to offer an upfront deposit as collateral (usually $200 or less), secured cards offer the benefit of spending power as well as the opportunity to improve your credit profile.