Prepaid cards are payment cards that are not tied to a bank or credit card account. As the name indicates, prepaid cards come loaded with funds, and each transaction is subtracted from the balance. Consumers may use prepaid cards to make regular purchases, give gifts of money to family or friends, and even make cash withdrawals at ATMs.
Importantly, prepaid cards can serve as a financial teaching tool for young people or those trying to rebuild their credit. The cards give users the experience of budgeting and using ATMs. However, because prepaid cards do not come with a line of credit and can only be used to the limit of their pre-loaded balance, they are low-risk for those still learning financial responsibility.