4 Hidden Fees to Watch Out For When Using Prepaid Cards

Do you use a prepaid debit card or have you thought about using one? For those who don’t want to use a traditional bank to house their money, but would still rather not carry around a ton of cash. A prepaid debit card may sound like the perfect solution. It’s important to know that there are hidden fees to watch out for though.  

Prepaid cards are not linked to your checking account. So you don’t need a bank account in order to use one. Unfortunately, the businesses that issue these cards make money by charging their customers fees. These fees end up costing users up to hundreds of dollars per year. 

I’ve used a prepaid card in the past and believed it would help me save money on ridiculous banking fees. However, it’s important to know that prepaid cards carry their own load of fees that you’ll want to watch out for.

Here are 4 of the most common types of hidden fees to watch out for, and how you can avoid paying them. 

1. Loading Your Card

The biggest drawback of using a prepaid card can be the action of simply loading money onto your card. Some options allow you to set up direct deposit for free. Other times, you may be expected to pay money to deposit your paycheck or other forms of income. 

According to NerdWallet’s analysis of the FDIC’s annual Survey of Unbanked and Underbanked households. Prepaid card users that don’t have a free direct deposit option could end up paying $182 per year just to access their own money. 

You can reload most types of prepaid cards via Western Union but you’ll get charged a reload fee. NetSpend is a prepaid card that charges you $2 to $3.95 whenever you want to purchase a reload pack which is the only way to add money to the card.

2. Inactivity Fee

Yes, with some prepaid cards you can get charged for simply not using the card for a certain period of time. This poses an issue if you have to stop using the card for some time due to travel or just want to spend less money and save. 

While a prepaid card shouldn’t be used to hold your money long-term (since there are better interest-bearing options out there). It still doesn’t help that you’d have to pay an inactivity fee for not using your own money. According to the Consumer Financial Protection Bureau, prepaid card companies are allowed to charge either a monthly fee or an inactivity fee but not both. 

The inactivity fee typically begins after 90 days to 12 months of non-usage depending on the card and will recur each month. Still, this is something you don’t want to look forward to if you stop using your card after a while and forget about it. 

  Here are 4 of the most common types of fees prepaid debit cards charge. Click To Tweet

3. Withdrawal Fee

Some cards like the Ace Cash Express Prepaid cards only allow you to withdraw $100 per day without incurring a fee. What if you need to withdraw more than that? You certainly can, but you’ll have to pay for it. 

This can make paying larger bills and expenses inconvenient and unnecessarily costly. Also, don’t forget about ATM fees as prepaid cards are notorious for tacking on extra charges to use the ATM. The GreenDot Prepaid Visa Card charges an in-network ATM fee of $3 along with an out-of-network ATM fee of $3.

In 2018, ATM fees hit a record high for the 18th year in a row. Detroit ending up being the most expensive city in the U.S. for ATM withdrawals. You work hard for your money and shouldn’t have to pay to withdraw your own cash. 

4. Purchase Fees

As if you didn’t think it could get any worse, prepaid cards like Opt+ actually charge you a fee whenever you make a purchase. Granted, the fee is only $1, it adds up over time. 

To avoid the fee you can switch to their other prepaid card option but pay a monthly service fee of $5.95 to $8.95 to use the card. No matter how you frame it, prepaid card companies are still trapping you into paying a fee to use the card and spend your own money.

What To Do Instead

I’ll be honest, prepaid cards are not my top recommendation anymore. They are safer to use than cash and may come in handy if you’re looking to do some shopping and don’t want to overspend. However, in most cases, prepaid cards are inconvenient to use and the fees don’t help much either.

Instead, I’d recommend looking into a bank or credit union with low fees or no fees at all. That way, you don’t have to worry about paying to add money to your card/account or miscellaneous purchase fees.

I like banking online because online banks tend to offer better interest rates for both checking and savings accounts. You can also easily set up direct deposit and mobile deposit checks as well. Plus, there are no monthly maintenance fees, minimum balance requirements, or overdraft fees with online banks like Capital One 360.


If you’re cautious of bank fees, prepaid cards are not much better. There are plenty of hidden fees to watch out for. Prepaid cards are ridden with fees and limitations that keep you from using your money how you want to.

If you’re worried about your credit or looking for an alternative to a traditional bank, there are better options. You don’t have to get cheated out of your own money with fees.