Comparing Prepaid Debit Cards to Account-Linked Debit Cards

Here’s the deal. “Prepaid debit cards” are different than “account-linked debit cards”.

An account-linked debit card is a debit card issued by a deposit-taking bank, and is usually issued as a supplemental access device to access your account (for example, it may be issued by your bank as another way to access your checking or savings account). This article explains some of the differences between account-linked debit cards and prepaid debit cards.

Any financial instrument has its own set of pros and cons. It is up to each individual to decide which one is best for their needs. An excellent example of this are prepaid debit cards versus account-linked debit cards.

Account-linked debit cards serve an important market – folks who have regular bank accounts (and who want to access their money at Point of Sale terminals, ATMs, or on the Internet). Similarly, prepaid debit cards serve a very important market – folks who either cannot get a regular bank account or who would rather not deal with a traditional bank. Other types of prepaid debit cards (such as teen cards, or gift cards) serve other markets – teens who want some financial freedom, parents who want to teach their kids good financial habits, or people who want to give the gift of cash securely.

Account-linked cards and prepaid cards each have different fee and legal considerations. The fees associated with account-linked cards are typically rolled into the fees charged for the bank account, although additional fees such as ATM access fees, overdraft fees, and Point of Sale transaction fees may be added in.

Prepaid cards can have a number of fees as well. Here at, we try our best to disclose all of the fees associated with individual prepaid debit cards, but the fees can be quite complex, and we always recommend that customers carefully read the fine print associated with each prepaid card product.

Some prepaid cards can have high, multiple and very confusing fee structures. Some products may waive activation fees in certain situations, but you need to understand the rules for qualifying for the waiver. Other cards may not have monthly fees if you fulfill certain conditions, such as making a direct deposit every month, but could charge you the fees if you don’t meet the criteria.

Some prepaid cards also claim that cardholders are not held liable for any fraudulent transactions. However, this kind of protection must be thoroughly checked because it can happen that once a card is stolen, the entire amount will be wiped out and since the card isn’t linked to a bank account, the cardholder doesn’t really have much hold over the loss. Banks that are members of the FDIC (or Federal Deposit Insurance Corporation) can easily be tracked, as they can be checked on their website. Each account holder is insured up to a certain amount. With prepaid cards, however, this type of security doesn’t necessarily hold true. The issuer often pools the amount so it doesn’t follow that each cardholder is insured the same way a debit cardholder is protected.

The differences between prepaid and account-linked debit cards can be insignificant to some people, but it is important to understand their characteristics and all their underlying features so that you can make a sound decision as to which financial instrument is best for you.

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