So I did an experiment with the use of prepaid debit cards from different issuers and service providers just to see if there would be a difference in the various service fees I otherwise ordinarily have to contend with when making use of traditional banking services. What I learned was that there are indeed some major savings to be enjoyed with the use of prepaid cards, but it definitely depends on quite a few dynamics and fine details about how you handle your finances in general, such as how frequently you draw money at the ATM for example and the size and frequency of the purchases you make.
So here’s what I learned…
Not all prepaid debit cards were made equal
I’m not quite sure if Virgin Money still offers their version of a prepaid debit card, but their rather stylishly designed one didn’t really offer me much by way of savings on associated banking / service fees. Virgin’s prepaid MasterCard came with a monthly card maintenance fee and that would have really defeated the purpose of making use of a prepaid debit card. Perhaps a little while ago it would’ve made sense because of some online services which were only accessible via credit card payments, like the cheapest broadband internet you could get as part of the fibre-to-home connectivity service.
This only serves to demonstrate that prepaid debit cards from different issuers and financial institutions aren’t the same. The one from what was previously BitGold (now GoldMoney) was great because it didn’t incur any sort of monthly service fees. The fees only kicked in when you complete a currency conversion (which includes converting metal holdings to fiat currencies and vice versa) or if you needed to have your lost / stolen card replaced.
Unfortunately since BitGold has rebranded to GoldMoney they don’t issue prepaid debit cards anymore, but if you have one that is active then at least you could still use it.
The best prepaid debit cards are backed by an underlying financial service
My mention of GoldMoney’s prepaid debit MasterCard brings into focus the fact that the best prepaid debit cards are indeed those which are backed by an underlying financial service which targets a very specific market. In the case of GoldMoney the targeted market is that of people who seek to invest directly in some precious metal holdings including gold and later silver.
So in this instance then there’s no real need for exorbitant service fees which are often charged for transactions.
A Payoneer card is also great if you earn money online as a freelancer, otherwise Neteller is perhaps the closest you can get to effectively connecting your traditional bank account to the prepaid MasterCard you’ll be issued with.
Prepaid debit cards are best for POS purchases and for online use
Prepaid cards incur some very heavy fees if you draw money from the ATM, although the ability to withdraw cash at any domestic ATM is a major advantage of these cards. Just like a traditional bank card however, POS payments incur no fees whatsoever, apart from currency conversion fees maybe.