A prepaid card is a payment card that you can use to pay for purchases. Prepaid cards can be either physical or electronic. When you use the card, the merchant deducts the amount you use from the total amount on the card.
Types of prepaid cards
There are different types of prepaid cards.
Prepaid cards issued by a financial institution
Prepaid cards issued by a financial institution link to certain payment card networks, such as:
- American Express
The payment card network logo will be on the card. You can use the prepaid card at most merchants that accept credit cards from the same payment card network. For example, you may use a prepaid MasterCard at a store that accepts MasterCard credit cards.
Note the following about prepaid cards issued by a financial institution:
- you need to put money on the card
- you can reload the card as many times as you want until it expires
- the money on the card won't expire
- you may have to pay a fee to reload the card
- you may be able to make cash withdrawals
- you usually won’t have to pay for transactions you didn’t make or approve
Replacing a prepaid card after it expires
If your prepaid card expires and it still has money on it, contact the prepaid card issuer.
The card issuer may:
- send you a new card
- send you a cheque for the remaining balance on the expired card
The card issuer may charge you a fee for these services.
Promotional prepaid cards
You may get a prepaid card as part of a promotional, loyalty or award program. Like other prepaid cards, they link to a payment card network.
Note the following about promotional prepaid cards:
- there’s usually an expiry date
- you can’t reload them
- you can’t make cash withdrawals
Read the card agreement carefully for details about the terms and conditions.
Fees to use a prepaid card
Fees can lower the value of your prepaid card. This means you’ll have less to spend. Review the terms and conditions of your prepaid card to find out what fees apply.
Depending on the kind of prepaid card you have, you may need to pay fees to:
- activate your card
- make purchases
- check your balance
- withdraw money from an ATM
- replace the card
- customize the card
- load more money onto the card
- cover overdrafts
- transfer the remaining funds onto a new card
- maintain your card if you don’t use it for a certain period of time
- keep your card active each month
Some prepaid cards charge an activation fee or purchase fee. You pay the activation fee only once. The fee isn’t refundable. Activation fees vary. They can be a flat fee, or can depend on the card’s value.
If there’s an activation fee, it takes money from your card. For example, if a $50 prepaid card has an activation fee of $4.95, then the actual amount of money on the card is $45.05.
Checking your prepaid card balance
Most prepaid cards offer several ways to check your balance and transactions, including:
- on a mobile device
- in store
- over the phone
You may have to pay a fee to check your balance.
Prepaid cards from federally regulated financial institutions must provide a toll-free number so you can check your balance.
Reviewing the terms and conditions of a prepaid card
Each prepaid card has different terms and conditions. Take time to review your prepaid card agreement so that you’re aware of any expiry dates, fees or limits.
Cancelling a prepaid card
Generally you can’t cancel a prepaid card. The only way to access the funds is to use the card.
Some card issuers will allow you to cancel the prepaid card for a fee. The issuer deducts the fee from the remaining balance before you get any money back.
Check the card’s terms and conditions for more details.
Where you can use a prepaid card
Before buying the card, find out if the places where you shop accept the card, such as:
- vehicle rental agencies
- pay-at-the-pump gas stations
- a single store or a group of stores
- online merchants
- merchants outside of Canada
A merchant can decline a prepaid card if:
- the merchant does not accept a prepaid card as a form of payment
- the balance isn’t enough to pay for the purchase
- there is a hold on the funds on the card
Paying bills with a prepaid card
You may be able to pay bills with a reloadable prepaid card. Check your agreement and ask your issuer. Find out if the merchant or service provider accepts prepaid cards.
Holds on funds when using your prepaid card
Restaurants, businesses that provide a service, hotels, car rental agencies or pay-at-the-pump gas stations may put temporary holds on the money on the card. This may limit the amount of money available. Check your balance after using your prepaid card.
- If you use a prepaid card to book a hotel room, some hotels will immediately reserve funds on the card to hold the room. You won’t be able to use this money to make other purchases. Once you've settled your hotel bill, the hotel credits any unused money from the hold to your prepaid card. If the hotel doesn’t clear the hold immediately, there may be a delay before you can use the funds
- If you use a prepaid card at a restaurant or other business, they may reserve funds to cover tips by adding an extra charge to the card
Registering your prepaid card
You must register your card to be protected from unauthorized transactions if your card is lost or stolen. Unauthorized transactions are transactions you didn’t make or approve.
To register a prepaid card, you usually have to give the card issuer the card’s registration number and your contact information.
Lost or stolen prepaid cards
Report your card lost or stolen. The prepaid card issuer may transfer money left on the card to a new card. Check whether a fee applies.
In some cases, losing the card is the same as losing cash. You can’t recover the money on the card.
If your prepaid card is lost or stolen, report it to the financial institution that issued your prepaid cards as soon as possible. In some cases, you may not get your money back for any transactions made before you reported the card lost or stolen.
You may not have to pay for an unauthorized transaction if your prepaid card is covered by a zero liability policy or fraud protection guarantee.
This may include cards which are:
- issued by federally regulated financial institutions
- part of a payment network such as American Express, MasterCard or VISA
You may have to pay for unauthorized transactions if you didn’t act responsibly to protect your card or if you shared your personal identification number (PIN).
Check your prepaid card agreement to see what happens if your card is lost or stolen.
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