Prepaid cards were originally designed to limit our spending, i.e. you could not spend beyond the deposited funds in your bank account. But we often find ourselves wrapped in different scenarios these days, looking for a way or two to spend a bit above our limit. In theory, if you have a balance of $50 on your prepaid card and then try to make a purchase worth $60, your prepaid card will be declined. Well, the good news is a new law has been made about overdrawing prepaid cards. In this article, we will see the answer to your question Can you overdraft prepaid cards?
The law passed in 2016 by the Consumer Financial Protection Bureau now allows banks and other card issuers to allow cardholders to spend below $0 balance temporarily. This was called an overdraft protection service. But in reality, the overdraft protection service is still largely unused by banks. There are banks with a strict no-overdraft policy despite this law. Some of those banks include American Express, Green Dot, and Chase Bank. Other card issuers have come up with different terms and conditions for their prepaid account, most of which work in a way similar to the overdraft protection services and incur no extra charge to qualified cardholders.
Purchase Cushion Protection
One of the policies developed by most card issuers that are similar to overdraft protection service is what is called purchase cushion protection. This is how this works: A scenario where you want to make a purchase or payment with your prepaid card and then realized that you are a few dollars short. It is embarrassing, so to say, that your transaction will be declined because of a few dollars. This is where the purchase cushion protection comes in. It allows you to make your purchase and overspend by a maximum amount of $10. And to not recur an overdraft fee, you will be given up to twenty-four (24) hours to bring your account back to positive, that is, to make a deposit that will cover the $10 you’ve overspent. Failure to do so within the stipulated time will have you incur overdraft charges on your account.
The following prepaid cards have the Purchase cushion protection but each has its separate terms and conditions.
Brinks Prepaid Mastercard
The purchase cushion protection is a free service that is made available by the Brinks Prepaid Mastercard. As stated above, you can overdraft up to $10 in your account, but that is the limit. You only qualify for the purchase cushion protection if you are a cardholder receiving direct deposits of salaries and paychecks, including government benefits payments. All these have to add up to a minimum of $500.00 monthly.
Paypal Prepaid Mastercard
Funding your Paypal Prepaid Mastercard is through your Paypal account. With the Paypal Prepaid Mastercard, you are allowed an overdraft of $10, but this can also be at your bank’s discretion. To qualify for the purchase cushion protection, you must have received direct deposits, e.g., paychecks, with the minimum amount of $200.00 into your account within thirty-five (35) days. To remain enrolled in the purchase cushion protection, you have to be receiving a minimum of $100 monthly from a direct deposit. When you overdraft, you have twenty-four (24) hours, starting from the time of the first transaction that caused you to overdraft, to bring your account balance back to zero (0). Not doing so will attract overdraft charges. You can only have five (5) waived overdraft charges monthly.
ACE Elite Visa Prepaid Debit Card
The purchase cushion protection has a similar structure here also. You are allowed to overdraft up to $10 above your available balance. Failure to bring your account to $0 or a positive value after twenty-four (24) hours will incur an overdraft fee of $20. There is, however, a way to avoid this fee. ACE Elite Visa Prepaid Debit Card offers an optional overdraft protection service. To opt in to this service, your account must have received a direct deposit(s) of $400 within the last thirty-five (35) days. After the overdraft protection service is initiated, there has to be a direct deposit(s) of at least $200 every thirty (30) days to continue enjoying this service.
NetSpend Visa Prepaid Card
As long as an account receives direct deposit(s) that equals a minimum of $200 every thirty (30) days, such Netspend accounts can enjoy the purchase cushion protection. It also has a limit of $10 overdraft on an account. You incur an additional $15 overdraft fee when you go above the $10 overdraft limit. And the bank only allows such transactions a maximum of three (3) times in a month.
How to Avoid Overdraft on Prepaid Cards?
The best way to avoid spending above your deposit is to avoid using prepaid cards that allow overdraft. You can get an American Express card, Chase’s Liquid card, or a Bluebird card. These card issuers have a strict no-overdraft policy. If you want to control your spending, get a card that does not allow you to spend more, no matter how little it is.
Another way to avoid overdraft on your card is to apply the trick of thinking you have less than you have. If you have a prepaid card limit of $50, pretend it is lower than that. This way, you get to carefully watch your spending once you get to your threshold. This will keep you safe from overdraft.
Conclusion
With the law passed in 2016, we do not need to walk out of a store downcast because we are short of a few dollars. You now have the option of overdraft on your prepaid card. You can also choose to not overdraft. It’s all your decision to make.
FAQs
- What is a prepaid card?
It is similar to a credit or debit card. A bank account is linked to the card and can be used to make purchases.
- What is a direct deposit?
A direct deposit is a fixed amount of money that comes into an account at regular intervals, mostly, every month. A common example is paychecks and salaries.
- How much does purchase cushion protection cost?
It comes at no extra cost. An additional fee is incurred when you fail to bring your account to $0 or a positive value after twenty-four (24) hours of overdraft.
