The best prepaid credit card has more to offer than you might think. A prepaid card can be an incredibly useful alternative to a conventional card—especially if you’re up against a less-than-ideal credit rating or need a payment option that helps you to stick to your budget. Quite a few new prepaid card offerings have popped up over recent years, some even offering perks like cash back. Let’s take a look at the prepaid credit cards that could be worth your while.
When determining a rating for individual credit cards, the Forbes Advisor Canada editorial team factors in an exhaustive list of data points. With prepaid, the scoring model used takes into account factors such as, but not limited to, welcome bonus, rewards, fees, and other features, such as consumer and travel insurance. Keep in mind, what may be best for some people might not be right for you. Conduct informed research before deciding which cards will best help you achieve your financial goals.
A travel-friendly prepaid card that comes with some cash-back rewards.
Rewards: None
Welcome Offer: None
Annual Fee: $0
Other Benefits and Drawbacks: This card offers a strong exchange rate on up to 10 different currencies.
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Not only do you earn interest on your purchases, but you can invest your earnings too.
Rewards: Earn 1% on all spending (1.5% if you have a Wealthsimple Save account).
Welcome Offer: None
Annual Fee: $0
Other Benefits and Drawbacks: If you’re looking to break into the world of crypto, here’s your chance. The Wealthsimple Cash card lets you earn your cash back in the form of one of 40 cryptocurrency types (though you can also opt for cash or stock rewards).
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This prepaid card charges no fees whatsoever, including interest and forex fees and it gives you 0.5% cash back on every purchase you make while giving you 2.5% interest on your balance.
Rewards: Earn 0.5% on all spending and 2.5% interest on your money.
Welcome Offer: None
Annual Fee: $0
Other Benefits and Drawbacks: The rewards here are nominal and you need to open an EQ Bank Savings Account to use it, but literally paying no fees means this card deserves a second look.
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This card functions like a prepaid card (no need to load funds) and earns a guaranteed minimum 0.5% cash back and significantly more at partner retailers. Plus, you’ll also earn 1% interest on the money held on the card, along with free daily transactions and no monthly or annual fee.
Rewards: Earn up to 6% cash back on restaurants and bars, 4% on selected app partners, 3% on gas and groceries and 0.5% on all other purchases.
Welcome Offer: None
Annual Fee: $0
Other Benefits and Drawbacks: Neo doesn’t outline exactly which retailers earn the high cash-back rates until you sign up for the card, though 0.5% minimum cash back is guaranteed. Plus, the standard 2.5% foreign exchange fees still apply.
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This card is aimed at youth and functions like a prepaid card, all while earning cash back at restaurants and other retailers. Plus, you’ll also generate donations for Junior Achievement of Canada with each purcahse, at no cost to you.
Rewards: Earn average of 5% cashback at select restaurants and through delivery platforms like Uber Eats. Earn 2% cash back at select clothing stores, including Dynamite, JD Sports and Simons. Earn 2% cash back shopping at bookstores like Chapters or Indigo, or buying books online through Kobo. Earn 2% cash back shopping for gaming items and accessories through companies such as Nintendo, Playstation and Steam. Earn 2% cash back on purchases made at fitness locations like GoodLife Fitness or YMCA.
Welcome Offer: None
Annual Fee: $0
Other Benefits and Drawbacks: They haven’t outlined all the retailers that earn the high cash-back rates and they don’t guarantee a base cash-back rate either.
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An affordable monthly or yearly fee gets you cash-back rewards, credit building and in-app credit score updates, budgeting insights and financial coaching.
Rewards: Earn 1.5% cash back on groceries, transportation, food and drink, up to 5% extra cash back at selected merchants and earn 0.25% cash back on all other purchases.
Welcome Offer: $20 cash bonus when you sign up for a KOHO account with our link when you make your first purchase within 30 days of registration
Annual Fee: $9 per month or $84 per year.
Other Benefits and Drawbacks: No foreign transaction fees. Get three credit building options, including a line of credit, a secured line of credit between $30 to $500 or both, which starts at $7 per month for up to six months. You can also subscribe to KOHO Cover interest-free overdraft protection for an additional fee.
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Compared with its premium counterpart, you won’t find many perks here — but it’s hard to beat a 1% cash back on groceries, transportation, food and drink.
Rewards: Earn 1% cash back on groceries, transportation, food and drink, up to 5% extra cash back at selected retail partners.
Welcome Offer: 30-day free trial to any KOHO subscription plans
Annual Fee: $4 per month or $48 per year with an Essential plan
Other Benefits and Drawbacks: Foreign currency rate is only 1.5% for non-premium KOHO subscribers.
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For anyone who wants to build their credit score with a secured Visa card.
Rewards: None
Welcome Offer: None
Annual Fee: $0
Other Benefits and Drawbacks: Nearly every applicant is approved regardless of credit rating.
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A prepaid card from a Big Five Bank that comes with extended warranty and purchase protection.
Rewards: None
Welcome Offer: None
Annual Fee: $6.95
Other Benefits and Drawbacks: As an extra bonus, the BMO Prepaid Travel Mastercard comes with free 24/7 credit monitoring.
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Add money from your paycheque directly to your credit card.
Rewards: None
Welcome Offer: None
Annual Fee: $6.95
Other Benefits and Drawbacks: Reloading the card requires an in-person trip to a Money Mart or eligible retailer.
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A prepaid card designed for jetsetters looking to quickly alternate between currencies.
Rewards: None
Welcome Offer: None
Annual Fee: $0
Other Benefits and Drawbacks: Cardholders must visit a Canada Post location to load funds on their card and cards expire after five years.
A prepaid credit card is a credit card that can be loaded, or comes preloaded, with a desired or preset amount of money. Some are reloadable while others are for one-time use, but they can all be used wherever the credit card network they have in their corner—whether it be Mastercard or Visa—is accepted either in-person or online. It may carry with it a number of transaction fees or be able to host a number of different currencies.
With a prepaid credit card, you load funds on your card and then spend them via the credit card. The amount you load becomes your credit limit, so to speak.
There are several ways to active prepaid credit cards. You can either call the number on the back of the card, you can setup an online account at the prepaid credit card’s website or you can activate your card in-person where you bought it, either at the retailer with the help of the cashier or at the bank with the help of the teller.
If the prepaid credit card is only to be used at a specific retailer — like a gift card — then your balance can be checked in-person at the checkout counter at that retailer or at that retailer’s website. If the prepaid credit card is a card that can be used within a credit card network like Visa or Mastercard, you can usually call the number on the back of the card to check your balance or use your account on the corresponding website or mobile app to check the balance.
If you’ve gotten a prepaid credit card from a bank, you should be able to reload your card with an Interac e-transfer or a direct payment from your bank account. If the card is from a retailer, you can reload it in-person at that retailer. Finally, if the card is independent, you will likely need to create an online account and reload it through the card’s website or mobile app using a debit or credit card payment.
With a prepaid credit card, there’s some steps involved to maintaining it. First, you’ll have to activate your card, either by loading funds onto the card or registering your card. You’ll have to check your card’s balance throughout and reload it as your see fit.
With a prepaid credit card, you pay upfront to load the card and with a conventional credit card, the issuer fronts you the money and you pay it back. A prepaid credit card doesn’t require a credit check and doesn’t typically build your credit score. A conventional credit card requires a credit check and can help build your credit score. Essentially, if you don’t want to build or affect your credit and like to pay for things up front, a prepaid credit card could be for you. However, if you like to have more funds at your disposal and want to build your credit history, a conventional credit card may be for you.
Mastercard offers prepaid gift cards that are one-time-use and can be used wherever the Mastercard network is accepted. They also offer reloadable prepaid Mastercards that can be loaded over and over again with funds via Interac e-Transfer, another credit or debit card and preauthorized payments. Some examples include the Canada Post Cash Passport Prepaid Mastercard, the Titanium+ Prepaid Mastercard and the BMO Prepaid Travel Mastercard, among others.
Prepaid Visa Cards operate in much the same way that prepaid Mastercards and Amex cards do. The only difference is the prepaid cards work on the Visa credit card network and are only accepted wherever Visa is, either in-store or online. Visa, like Mastercard offers either reloadable, open-loop prepaid credit cards or one-time-use, closed-loop gift cards.
Prepaid Amex Cards work like gift cards and charge a $4.95 activation fee. They come in denominations between $25 and $1,000 and can be used wherever Amex is accepted in-store or online. The cards aren’t reloadable, but they can be replaced if the prepaid Amex Card is lost or stolen.
These are prepaid credit cards designed for travelers because they can host multiple currencies without charging foreign transaction fees. They are advantageous for travel because you are spending a set, preloaded amount and they can work internationally with no hassle. Then, when you spend all your money, you can either cut your losses or reload the card, reducing fraud risk when you travel abroad.
Prepaid gift cards are either hosted by credit card networks and can be used wherever those credit cards are accepted or they can only be used at the retailers you got them from. They are preloaded with preset denominations, can’t be reloaded and are designed for single-use. Of course there are some exceptions to this. Starbucks gift cards can be reloaded physically or digitally, but most are single-use.
Outside of prepaid credit cards, you can always make purchases with your debit card, which also uses your own money. You can also use Paypal, a mobile wallet, a crypto credit card or skip the middle man and send and receive money directly via Interac e-transfer. Prepaid credit cards aren’t the only option when paying for things, but they do provide a level of convenience, while limiting your potential debt.
Some prepaid credit cards come with fees, either annual (like regular unsecured credit cards), monthly or per transaction. It really depends through, how these credit cards are structured. The networks can be organized in the following ways:
A closed-loop prepaid credit card is one that can only be used at a specific retailer, like a gift card. Closed-loop prepaid credit cards do not carry any fees. Some are reloadable, but most can only be used one time.
Open-Loop
Open-Loop prepaid credit cards are prepaid credit cards that can be used in-store or online wherever the credit card network shown on their front operates and is accepted, whether that be Visa, Mastercard or Amex. Open-Loop cards do have fees. One example is the KOHO Extra Prepaid Mastercard, which has an annual fee of $84 or $9 per month. It should be noted though that not all open-loop cards carry fees, just some of them.
If you are paying a fee on your prepaid credit card, you will likely run into a few common ones, including activation fees charged at your first use, transaction fees that can be charged at the point of sale and/or fees when you use the card to extract cash from an ATM. There’s also often fees every time you reload your prepaid credit card with funds through an Interac e-Transfer. In all cases, these fees are nominal, but they can add up. You’ll also likely pay a foreign transaction fee of 2.5% plus exchange fees for unsupported foreign currencies.
When considering the best prepaid credit card for you, there are a few things to look at. Make sure you choose a credit card issuer that you can use at businesses you frequent. Then, look for a card with a fee or limit you’re comfortable with. You may also want to look at whether the card earns rewards or cash back, as some do. You can also look for extra features such as whether it offers budgeting insights or security features. Making sure it is easy and convenient to load is important, too.
Prepaid credit cards can be acquired a number of ways at several locations.
Reloadable prepaid credit cards and single-use gift cards are most commonly found near the checkout counter of grocery and drugstores, but are also available at electronics stores and convivence stores. They are meant to be purchased as you checkout with other items and can be loaded with the help of the cashier if they do not have predetermined denominations listed on them.
Online
Prepaid credit cards can be ordered online either directly from the website of the card itself or the store and bank where they can be found. Examples of cards that can be ordered online include, The Joker Card, Mastercard Prepaid Gift Cards and the Canada Post Reloadable Prepaid Visa Card.
Canada Post
The post office is a great source for Prepaid Credit Cards given that it carries a few of its own — The Canada Post Reloadable Prepaid Visa Card and the Canada Post Passport Prepaid Mastercard.
Banks
Walk into a CIBC bank branch and you can acquire the CIBC AC Conversion Visa Prepaid Card. At BMO, the BMO Prepaid Travel Mastercard can be found, so a bank is the perfect place to find a prepaid credit card or order from your online banking portal.
A prepaid credit card is so simple to use because once it is loaded with funds, it can be used like any other credit card. All you have to do is tap it in-person at the point of sale or input credit card details, including credit card number and CVV (they don’t always have an expiry date and sometimes just have a code) at checkout online. As long as there is money on it, it will continue to work. But, when the money runs out, it won’t anymore unless it’s reloadable and you reload it with new funds.
Plenty of people can benefit from a prepaid credit card, including:
There are several advantages to carrying a prepaid card. Here are the most common below:
Since you’re not dipping into a credit line and expected to pay it back because the source of the funds on a prepaid credit card is your own money, you don’t have to worry about credit card interest. The money on the card is the money you’re spending (excluding fees) so it’s harder to go into debt and everything is a lot more straightforward.
When a prepaid credit card does give you rewards, it’s mostly cash back or points on the purchases you are making with it or the purchases you’re going to make. In some cases, you can also trade points for other rewards just like a regular credit card. Many of these prepaid credit cards have partnerships with certain retailers so when you make purchases at a partner, you are rewarded the most, either with high cash back percentages or double the reward points.
This isn’t always an advantage, as some prepaid credit cards do have annual fees. However, it’s more common to pay no annual fees, which can’t be said about the most premium rewards credit cards. This is an advantage because the less money you’re paying, the more money you’re saving.
Since you’re not dealing with credit, there’s no credit check to qualify for a prepaid credit card. Instead, you can use it as soon as you take it out of the package and activate it. On the other side, some prepaid credit cards like the KOHO Extra Mastercard, do have credit building options where they will open a line of credit or a secured line of credit for you and every time you make a payment, it will increase your credit score. If you operate these lines of credit together with your prepaid card, you can work it to have all of the benefits of building your credit with the credit line and none of the risk, since most of your spending would go on the prepaid card.
Of course, nothing is entirely without risk. Below are the drawbacks that come with prepaid credit cards:
When you do get rewards from a prepaid credit card, you won’t get high earn rates. At most, you’ll see a base earn rate of 1% unless you’re using it at partner retailers, which may offer higher earn rates for specific purchases there.
There aren’t any perks available on some prepaid credit cards other than no annual fee or a little bit of cash back or reward points. If anything, the structure of a prepaid credit card is reward enough because you’re not generating any more debt.
If you’re planning to use a prepaid credit card while traveling to limit the debt you take on, unfortunately, you won’t be seeing any travel insurance coverage for anything that may happen on your trip. Plus, your purchases aren’t protected because there’s no extended warranty or purchase protection that comes on a prepaid credit card.
Unless there’s a specific credit building component, a prepaid credit card is not reporting your transactions to the credit bureaus, so you’re not raising your credit score by using it, like you could potentially do with a regular, unsecured credit card.
Prepaid credit cards are best for those who don’t want to be on the hook for paying back a line of credit and prefer to use their own money when conducting transactions. It also limits how much they can spend, which is great for budgeting because once the money runs out, it’s gone (unless you reload the card, that is).
Related: What is the best credit card for me
If you’d like to avoid using a prepaid credit card, there are still a number of payment methods that offer similar benefits, including:
There aren’t exactly different types of credit cards. They all essentially do the same thing and they are either reloadable or they are not. You can either use them repeatedly or you use them one-time only, like a gift card. Though there are relatively few variations, prepaid credit cards are known by a number of different names:
In order to determine which prepaid credit card is best for you, you’ll have to examine your specific needs. For example, the Premium KOHO Prepaid Card is best for Canadians looking to earn cash-back rewards or interest on their balance, while the Wealthsimple Cash card is best for anyone looking to quickly invest or earn cryptocurrency. The CIBC AC Conversion Visa Prepaid Card is best for anyone who is looking to spend in multiple currencies.
Many Big Five Banks, such as CIBC and BMO, offer prepaid credit cards in Canada. Other banks that offer prepaid credit card options include Home Trust, KOHO, Wealthsimple and Titanium.
No. Most prepaid credit cards will not help you build credit within Canada. However, secured cards, like the Home Trust Secured Visa, can assist you in building credit.
No, prepaid credit cards do not require credit checks.
Typically, prepaid credit cards do not have annual fees.
There are plenty of prepaid credit cards to use online. However, a card like the Neo Money Card is a good choice, as it earns cash back at partner retailers. The Wealthsimple Cash card is also a good choice for shopping, especially if you shop at foreign retailers, since it has no foreign transaction fees.
Yes. Plenty of these cards have no annual fees and some, like the Wealthsimple Cash card, have no foreign transaction fees either.
