Prepaid Debit Cards

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So you may be asking what is a "prepaid card and why should I care?" Well, prepaid cards are an effective replacement for carrying cash and let you make purchases with any merchant that accepts them. Basically there are two main types of prepaid cards in the marketplace-
"closed loop" cards and "open loop" cards. Both types of cards allow you to store a monetary value on the card, or rather, in a bank account associated with the card's unique identifier number. This number can be read on the face of the card or when the magnetic stripe on the back of the card is swiped by a merchant's card reader machine or an ATM machine.

Closed-loop cards include merchant gift cards, transit system fare cards, and prepaid telephone cards. Typically, they can only be used by a single store or vendor or a group of stores. They seldom have fees associated with them, but depending on the card can lose part of their value over time as the issuer deducts a monthly inactivity fee or usage fee. Many of these cards are of a type that are loaded only once with value and discarded when the value is used up. Their biggest limitation is that they can only be used with vendor associated with the card,
be it a store, restaurant chain, or other type of merchant or transaction focused organization.

Open loop cards, in contrast, are not limited for a narrow use but can be used at a wide variety of retail locations and for banking purposes like
receiving direct deposits or withdrawing cash from automated teller machines. You deposit money into your card account and withdraw it with every transaction such as a purchase or a cash withdrawal. Open-loop cards can also be "reloaded" with additional money that you can add
to the card. (You can read more about how this works in the next section: Using a Prepaid Card). Hence, they are also known as "reloadable general purpose cards."

Prepaid cards do have fees that come with using them. These fees vary from card to card. The one-time fee for opening and activating a prepaid card account can range from $0 - $30. Also, most cards charge a monthly maintenance fee ranging from $4 to $10 and they also may charge modest transaction fees each time the card is used.