How Does a Prepaid Visa Work?

by Gregory Hamel ; Updated July 27, 2017

Credit cards are a convenient way to pay for small purchases without carrying cash, but every item you buy with a credit card accrues on your balance against the limit of the card. If you don't pay off your card balance in full, interest will be charged to your account. Visa Prepaid cards are an alternative to traditional credit cards that enable users to load cash on a card and spend it as they would with a normal credit card.

Prepaid Card Basics

Visa is one of the most widely accepted types of credit cards in the U.S., making Visa cards branded cards an attractive option for those looking for flexibility when paying for goods and services. Prepaid Visa cards allow users to pay wherever Visa is accepted, pay bills and withdraw funds from ATMs without the risk of going into debt and owing interest. You must transfer funds onto the prepaid card before you can use it and you can only spend as much money as you transfer onto the card. In other words, a prepaid card is technically not a credit card at all because you never actually borrow against a credit limit. You can reload funds on a card at stores and kiosks around the country.

Benefits

The primary benefit of a Visa prepaid card is that it offers the payment convenience of a normal credit card without having to accrue a credit card balance. A prepaid card forces you to limit spending, since you cannot spend more than you load on the card. This may be especially helpful for those who make purchases impulsively.

Drawbacks

All prepaid cards have several potential drawbacks. Since you must spend money that you load on the card, it limits you to spending whatever you loaded ahead of time. If you use up your funds, you might be unable to pay unless you can locate a store or kiosk to add more funds to the card. In addition, you might need to borrow money to make a purchase if you happen to be low on cash at a certain time during the month, which is not possible with a prepaid card. Prepaid cards may also charge fees.

Considerations

Debit cards allow users to spend funds in a checking account up to the balance of the account. Debit cards may be preferable to prepaid cards since they may not charge fees for use and you can have money you earn transferred directly into the checking account associated with the debit card so that you can start spending it immediately without loading it onto a different card.

About the Author

Gregory Hamel has been a writer since September 2008 and has also authored three novels. He has a Bachelor of Arts in economics from St. Olaf College. Hamel maintains a blog focused on massive open online courses and computer programming.