Prepaid Cards or Checkless Accounts?

Some people prefer to use a prepaid card instead of a traditional bank account for their basic banking needs.

Prepaid cards generally allow consumers to spend only the money deposited onto them. These are "reloadable" cards, so money can be added, sometimes through direct deposit. They can be used for purchases at merchants that accept credit cards, and often for ATM withdrawals worldwide.

Some prepaid cards come with a set value, while with others you load money onto the card after obtaining it. Other cards are used only to receive government benefits or wages deposited by employers (payroll cards).

Prepaid cards can be used as alternatives to traveler's checks, especially for international travel, and as a way for parents to give an allowance to their children.

Prepaid cards (also known as stored value cards) have potential benefits, but can also come with potential costs. Read all the information that comes with the card so that you understand the fees.

For consumers who don't plan to write checks but do want to bank electronically, some institutions offer another option: "checkless" transaction accounts that use online banking or a debit card to pay bills and make purchases.

Checkless accounts also may be free or less costly than other checking accounts. Checkless transaction accounts offer consumers an easy way to build savings through regular, automatic transfers to a savings account and havethe same legal benefits as regular checking accounts in areas such as federal consumer protections.

Source: FDIC