Having a bank account and credit card is something many of us take for granted. But for nearly 10 million American households, access to traditional banking services is limited or nonexistent. These "unbanked" and "underbanked" consumers instead rely on alternative financial services like check cashing or payday loans, often at high costs. 

Prepaid debit cards can provide a safer, more affordable option. Prepaid cards work similarly to traditional debit cards but aren't linked to a checking account. You load funds onto the card and then use it to make purchases or withdraw cash. Read on to learn more about Prepaid card solutions designed with unbanked and underbanked consumers in mind.



What Makes Someone Unbanked or Underbanked?

Someone who is unbanked has no formal relationship with a bank or credit union. They don't have a checking or savings account. The underbanked have a banking relationship but still depend on alternative financial services for needs like borrowing money or cashing checks. 

There are a few common reasons why consumers go unbanked:

Don't Have Enough Money

To open a checking account, banks usually require a minimum opening deposit. For someone living paycheck to paycheck or dependent on cash income, coming up with even $25 or $50 at one time can be challenging. There may also be fees like monthly maintenance fees that make maintaining an account cost-prohibitive.

Distrust or Confusion About the Banking System

A lack of financial literacy or negative past experiences like overdraft fees can make the unbanked wary of traditional financial institutions. Some also believe—incorrectly—that banks are only for rich people or that an ID is required to open an account.

Privacy Concerns and Cultural Barriers 

Immigrants or certain cultural groups like Hispanics and Native Americans are more likely to be unbanked. Some are uncomfortable providing personal information or communicating in English with bank staff.

Bank Locations Are Limited

Rural areas or low-income urban neighborhoods often lack physical bank branches. Without reliable transportation, proximity can be a barrier to accessing in-person banking.  



How Prepaid Cards Can Help the Unbanked and Underbanked ?

Prepaid debit cards share similarities with checking accounts while avoiding some key barriers like minimum balances and credit checks. For the unbanked, prepaid cards are often the first step towards a banking relationship. Let's look at some of the benefits of prepaid cards:

Easy to Obtain

Prepaid cards typically have lower (or no) minimum balance requirements. Application criteria are also minimal—usually just ID verification. Some options don't even require a hard credit check. This increases accessibility for lower-income applicants.

Load Options

Consumers can add money ("load") to a prepaid card in many ways, including:\

  • Cash at retail stores
  • Direct deposit of paychecks or benefits 
  • Bank transfers
  • Mobile check capture using the card's app

Flexibility to load via cash is ideal for the unbanked who rely on cash income.

Use Anywhere

Prepaid cards work just like credit and debit cards for online, in-store, or over-the-phone purchases. The card network logo (Visa, Mastercard, etc.) indicates wide merchant acceptance.

No Overdrafts 

Prepaid cards let you only spend the amount you've loaded onto the card. There are no linked accounts vulnerable to overdrafts and insufficient fund fees.

Build Credit History

Some prepaid providers report account history to credit bureaus. Timely payments can help the unbanked establish a positive credit record.

Money Management Tools

Prepaid apps and account dashboards make it easy to track balances and transactions. Some even have budgeting features and save-toward-a-goal functionality.

FDIC Insured

Balances on federally-regulated prepaid cards are FDIC-insured up to $250,000 in case of provider insolvency. This equals the protection offered by major banks.



Top 5 Prepaid Cards for Unbanked and Underbanked

Now that we've looked at the benefits let's discuss five of the best prepaid cards designed with the needs of unbanked and underbanked consumers in mind.

Netspend

With nearly 20 years in the prepaid industry, Netspend is a trusted provider of prepaid Mastercard products. Their prepaid offerings are highly regarded for affordability, transparency, and an abundance of ways to load/access funds.

Key Perks:

  • No minimum balance or monthly fees
  • Load at 130,000+ retail locations nationwide
  • Direct deposit and mobile check load
  • Make purchases online or internationally
  • Optional savings account

Netspend has two plans: the Unbanked no monthly/annual fee option and FeeAdvantage with more features including identity theft protections and savings accounts. Both can be a great choice for unbanked or underbanked users.

Chase Liquid

As a product from one of the "big four" U.S. banks, Chase Liquid provides the convenience and trust of the Chase brand. Liquid cards have generous load limits and give account holders access to Chase's large fee-free ATM network.

Key Perks

  • Load up to $12,000 cash per month
  • No monthly account fees
  • Use 16,000+ Chase ATMs fee-free
  • Send instant transfers between Chase accounts
  • Optional joint accounts and teen/parent access

Chase Liquid relieves some pain points like access to cash and moving money. It's an easy transition for those seeking more full-service banking through Chase.

American Express Serve

The Bluebird and Serve cards from American Express are longstanding and affordable prepaid options. Like other AmEx products, they provide robust features and solid customer service.

Key Perks

  • No monthly fees
  • Direct deposit and cash reload at retailers
  • ATM access (out-of-network fees apply)
  • Mobile check capture 
  • Optional joint accounts and teen cards
  • Easy account upgrades to full AmEx products 

Serve cards appeal to loyal AmEx users and anyone seeking premium support. Streamlined upgrades also make American Express a strong option for the underbanked.

Walmart MoneyCard

In partnership with Green Dot, Walmart offers the extremely low-cost Walmart MoneyCard. It's a top pick for affordability with ample load options convenient for Walmart shoppers.

Key Perks

  • No monthly fee or minimum balance
  • Cash reloads at any Walmart register
  • Get cash back with purchases
  • Early direct deposit access
  • Mobile app with budget tools
  • Upgrade to a secured card to build credit

With in-store availability and integration with Walmart's financial services, the Walmart MoneyCard is ideal for on-the-go users.

Current

As a relative newcomer, Current modernizes the prepaid experience with a highly-rated mobile app. Current focuses on streamlining finances and avoiding hidden fees.

Key Perks

  • No minimum balance or hidden fees
  • Over 55,000+ free ATMs nationwide
  • High-interest savings account
  • Teen banking features
  • Gas hold adjustment 

Current uses technology like instant balance updates and transaction notifications to encourage good spending habits. It's a great choice for millennials and families.



Choosing the Best Prepaid Card for You

When comparing prepaid cards, consider costs, availability of free ATMs, load options, account management features, FDIC-insured status, and potential for account upgrades. Pick an established company with positive consumer reviews. 



Be sure to check the card's terms and fee schedule for elements like:

  • Account monthly/annual fees
  • Minimum balance requirements
  • Cash reload or ATM fees 
  • Bill pay and point-of-sale transaction fees
  • Inactivity or customer service fees
  • Cross-border transaction fees

A prepaid card lets the unbanked and underbanked access important financial services while avoiding common banking barriers. Prepaid cards are an empowering tool for taking control of your finances.