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An In-Depth Look at Prepaid Cards in Canada

Last updated on July 15, 2018 Views: 1647 Comments: 4

Like traditional debit and credit cards, prepaid cards can be used to order products from the internet, book airfare and hotel accommodations, and withdraw cash from an ATM. They offer a similar level of flexibility as traditional cards, but without the strings attached: unlike their plastic counterparts, many prepaid cards are not connected to financial institutions. Neither a bank account nor a credit score is required to get a prepaid card, making it one of the most accessible payment methods around.

Prepaid cardholders can only spend as much money as they’ve already deposited. If a cardholder adds $500 to a prepaid card and spends $200 on a hotel reservation or night out, then they can spend a maximum of $300 more before the card becomes unusable. All of these factors make prepaid cards ideal for those who can’t get approved for traditional credit or debit cards, or for those who simply want to use them as a budgeting tool.

Best Prepaid Credit Cards Canada in 2018

Credit CardCard FeaturesAnnual FeeCard ReviewApply for Card
CIBC Air Canada® AC Conversion™ Visa* Prepaid CardUp to 10 different currencies (simultaneously)
Draw from same currency as pre-loaded on card
$0Read MoreApply Now
Scotiabank Prepaid Reloadable Visa$10 annual fee
Free reloads
$0Read MoreApply Now
CIBC Smart Prepaid Visa24/7 online access
$0Read MoreApply Now
Canada Post Prepaid Reloadable Visae-wallet app
No bank account, no credit check needed
$0Read MoreApply Now
Home Trust Secured Visa No Annual FeeNo credit check
19.99% APR
Limit: $500-$10,000
$0Read MoreApply Now
Refresh Financial Secured VisaNo credit check
17.99% APR
Limit: $200-$10,000
$48.95Read MoreApply Now

The Benefits of Prepaid Cards

Studies indicate that 37% of Canadians surveyed expressed interest in prepaid credit cards, while another recent study indicated a 17% spike in acquired prepaid cards from 2016 to 2017. What makes these prepaid credit cards such a handy financial asset? Here are just a few examples:

  • Purchasing power for Canadians with credit concerns or ambition to build credit
  • Lowered or eliminated overdraft fees and interest
  • Secure & cost-effective online and in-store purchases
  • Automated bill payments

From families, to individuals, to business owners and travellers, there are perks to enjoy with prepaid credit cards in Canada, but also fees and factors to consider.

Prepaid Cards Limitations

While accepted by millions of vendors, prepaid cards may also have strict credit limits, high transaction fees and other drawbacks. Bank-issued prepaid cards. vs non-financial institution prepaid credit cards can differ, along with funded prepaid debit cards vs. prepaid secured credit cards. How? The primary difference is that the use of a prepaid debit credit card does not affect your credit rating (for better or worse), while the use of a prepaid secured credit card does and offers an opportunity to build or rebuild credit.

Which is best for you? Discover the options.

Types of Prepaid Cards – Prepaid Debit vs. Prepaid Credit Cards

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Prepaid debit cards and secured credit cards differ substantially. A prepaid debit card is loaded with funds and can then be used by the cardholder to make purchases. The card may be intended for one-time use, might be anonymous for security reasons, and can’t always be used for online purchases.

Prepaid secured credit cards also require a security deposit. But unlike a debit card, if cardholders responsibly pay their credit card bill each month, or at least make the minimum payment required, their credit score gradually increases. If they don’t make their required payments, their credit score decreases and the credit card issuer can tap into the security deposit in order to cover the charges.

Prepaid Debit Cards

Some noteworthy perks of prepaid debit cards include:

  • Useable for cashless shopping
  • Low annual fees
  • Great for gifts
  • Bypass banks or financial institutions
  • Money management tool for individuals and businesses
  • Accessible to all

CIBC Conversion Card

Prepaid Debit Cards for International Travel and Online Shopping

CIBC Air Canada AC conversion Visa Prepaid CardPrepaid cards are very convenient for their low barriers to entry and simple functionality, but they’re typically not recommended for use while travelling abroad. The CIBC Conversion card changes this notion, however, with its travel-friendly ability to hold multiple international currencies simultaneously. Up to 10 different currencies can be loaded to the card at locked-in exchange rates, and then spent while abroad.

This card feature extends into the online shopping realm as well. If you frequently purchase from US-based eCommerce companies, for example, then you might opt to load the card with USD whenever you see the most favorable exchange rate and then save those greenbacks for your next online shopping spree. Your currencies are manageable via an online platform provided by CIBC, and cardholders can load the equivalent of up to $20,000 to the card (spread across the different currencies).

CIBC’s AC Conversion card is aptly named, because whenever the cardholder makes a purchase in a foreign currency, the card automatically draws from that same currency—as long as it’s preloaded to the card. With one free international ATM transaction per month, no annual fees, and 24/7 support, it’s a great companion for travellers who might not have the credit required for ‘no foreign transaction fee’ credit cards.

Scotiabank Prepaid Reloadable Visa

Prepaid Debit Cards for Cashless Shopping & Low Fees

Scotiabank Scene Visa

Prepaid cards allow in-store or online cashless purchases and payment processing, and typically come with very low annual fees. For example, with a minor $10 annual fee, and free reloads online or via mobile, the Scotiabank Prepaid Reloadable Visa is fit for a smart shopper. Get up to $2400 loaded on your card, and enjoy low purchase fees deducted on your first value load for only $10. Also, leverage your payment security with zero liability guaranteed, and secure reloads that appear on your card within 48 hours to 4 business days max.

CIBC Smart™ Prepaid Visa* Card

A Rechargeable Present

cibc smart prepaid visaWe’ve all heaved sighs of disappointment after receiving gift cards to stores we never shop in. So when special occasions come around, there’s no better or more flexibile gift to give than pure cash – on a prepaid debit Visa card. The CIBC Smart™ Prepaid Visa* Card, offers cardholders 24/7 online access to account details and easy online reloads (if you want to make it a gift that keeps on giving).

Canada Post Prepaid Reloadable Visa® card

Forget Credit Checks or Bank Accounts

Not all Canadians have bank accounts, or a high enough credit score to be approved for a credit card. But most of us have a mobile phone now, and cards like the Canada Post Prepaid Reloadable Visa® card allow us to seamlessly manage our money in an e-wallet app. Canada Post and other non-financial institutions offer these prepaid debit cards (both prepaid Visa & Mastercard are available) without a bank account or credit check. Just bring your valid government-issued photo ID to a Canada Post branch and buy the card for $15. Reloads are only $3.

Budget Properly and Manage Your Expenses  

A prepaid card can be a very effective budgeting tool for both individuals and businesses, as it allows them to set monthly budgets/spending limits and ensure they’re not exceeded. You or your employees can easily overspend with a credit card, but a prepaid card keeps a ceiling on spending and you/your business in the black.

Prepaid Credit Cards

Secured credit cards can be an ideal solution for individuals looking to improve their credit score. Qualification requirements are usually minimal, and the card issuer regularly reports a cardholder’s responsibility to credit bureaus. Additional secured card benefits might include:

  • Low annual fees
  • Free financial education resources
  • More security perks and protections than prepaid debit cards
  • Some cards offer eligibility for age 16+
  • Discounts on vehicle and travel insurance

Home Trust Secured Visa No Annual Fee

Low Barriers for Approval

Home Trust Secured Visa Low-Rate credit cardUnlike unsecured credit cards, secured credit cards usually have very low credit score requirements for applicants, and sometimes won’t run a credit check at all. The Home Trust Secured Visa No Annual Fee requires no credit rating minimum (most applicants are accepted), gives two different options for annual fees pending interest rates ($59 annual fee and 14.90% interest or no annual fee and 19.99% interest), international cash withdrawals at over 1 million ATMS worldwide, and a very wide security deposit from $500-$10,000.

Refresh Financial Secured Visa

Financial Know-How Alongside Credit Building

refresh financial visaCredit building is the common selling point in many secured credit cards, but some card issuers pair their clients’ financial growth with financial education resources. The Refresh Financial Secured Visa offers this opportunity via online money management courses called Refresh f.i.t.

Which Type of Prepaid Card Is Right for You?

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There are a range of benefits and drawbacks of using prepaid cards in Canada, be they debit or secured credit cards. With prepaid debit cards you can make cashless payments with ease, simplify the management of your personal or business expenses, bypass credit checks, and keep your credit score unaffected. With secured credit cards, you can receive a range of benefits that many standard credit cards offer, and with responsible use your card is a tool for improving your credit score.

So which card’s for you?

Article comments

4 comments
CVandergrift says:

This is aggravating………
I have a friend in Canada I send money gifts to sometimes and he has problems getting cash from the MoneyGram stores up there, plus he doesn’t have a car.

I thought would have him get a prepaid debit card in his name, and I would just reload it instead of using MoneyGram, since they don’t have their own cards.

You’d think these companies would be smart enough to have special cards for this kind of thing.

The GreedyRates Team says:

Hey CVandergrift,

What an interesting comment—thanks for sharing. If you’re trying to send money to a friend in Canada, then it’s impossible to avoid some type of exchange or a payment method outside our structured financial system. If you’re sending him dollars, it requires some exchange into CAD for it to be useful to your friend, and this requires a bank. If you could buy a card for someone unrelated to you and simply put money on it that they could use, then this would circumvent the global payments system that’s required for a society with financial accountability and transparency. We recommend going with Western Union or using a service like PayPal to send money gifts to friends in other countries.

GreedyRates

Phil says:

CIBC Smart Visa Prepaid card cannot be used as a gift card. This is stipulated on the CIBC page for the card…so you can’t give it to somebody else for their use.

The GreedyRates Team says:

Hey Phil,

That’s correct. Merchants consider the card a prepaid card, which is more like debit than a gift card. This means that if you apply for it, it will require some personal information from you so that others can’t use it—just you. This is a good thing; usually if you misplace a gift card, anyone can pick it up and use it. If you lose your prepaid Visa card, you wouldn’t want someone to go to the store and buy clothes with it, would you? They can’t because like a credit card, the merchant will check your ID to ensure they match. Stay safe!

GreedyRates