How Do Netspend Cards Work?

Netspend offers prepaid MasterCard and Visa debit cards requiring no minimum balance and no credit check. All transactions made using Netspend cards are insured by the Federal Deposit Insurance Corporation (FDIC) up to the current coverage limit, and the cards can be used anywhere MasterCard and Visa debit cards are accepted. Cardholders can make in-store purchases, shop over the phone and online, and withdraw cash at ATMs worldwide.

Founded in 1999, Netspend is a leading provider of prepaid debit cards and commercial prepaid card solutions, with more than 10 million customers served in the U.S. There are several ways you can apply for a Netspend card. Once you receive your card, you can activate it online or via the phone, just like any other debit or credit card.

Understanding Netspend Cards

Prepaid debit cards, such as Netspend cards, differ from credit cards in that you can only spend funds, which you have already preloaded onto the card. In other words, a Netspend card is not a credit card at all but simply a way of making funds that are already in your possession available via credit and debit card electronic payment technology.

Credit cards offer a revolving line of credit, which you can typically pay off over time. In addition, outstanding credit card balances accrue interest, which must also be paid off. With a prepaid card, you're spending your own money, whereas using a credit card is like spending borrowed money, which you are expected to pay back with interest at a later date.

Another difference between prepaid debit cards and credit cards is that many credit cards offer spending rewards in the form of points, cash back, or airline miles. Most prepaid cards, including the Netspend Small Business Prepaid Mastercard, do not. However, credit card holders typically have to spend a considerable amount on their credit card to really see rewards benefits.

The biggest similarity between prepaid debit cards and credit cards is that they usually have a card network logo on them like Visa or Mastercard. This means the card can be used at any place that accepts either of these methods of payment. However, one major difference is that using a Netspend card does not impact a person's credit score, such as a credit card does.

Getting a Netspend Card

Netspend applications are quick and simple, just requiring your name, address, and email address. All applicants are guaranteed approval once the applicant's identity is proven, and new cards are sent via mail within seven to 10 business days.

How to Use Netspend Cards

Netspend cards can be used just like credit cards or debit cards. You can choose credit at checkout and provide a signature, or you can choose debit and enter a PIN. Each purchase comes with a $1.95 fee regardless of which option you choose. Fees for ATM cash withdrawals are $2.95.

Individual transaction fees can be avoided by subscribing to premium Fee Advantage Plans, which charge $9.95 monthly. This fee can be reduced to $5 by having at least $500 direct deposited to your account each month.

How to Reload Funds

One of the best features of a Netspend card is how easy it is to add funds to the card. Funds can be added to Netspend accounts through direct deposit, bank account transfers, Netspend card account transfers, or through Netspend reload network locations. The only ways to add funds to the account without incurring fees are through direct deposit or through the Netspend online account center.

Four Benefits of Netspend Cards

1. Separate business and personal expenses: The main reason to get a prepaid business card is it allows you to separate personal expenses from business expenses. This makes life easier at tax time.
2. Manage employee (and personal) spending: A prepaid debit card is a perfect tool for managing the spending of other employees, as you can ensure that nobody using it spends more than you want. With the Netspend Small Business Prepaid Mastercard, you can distribute funds to up to 10 sub-accounts. Spending on a Netspend account is also capped at $5,000 each day. Just remember that additional sub-accounts will cost you $1.95 each per month.
3. Allows for business card use: Running an entirely cash business makes it very difficult to keep track of your money. A prepaid debit card at least allows you to allocate cash for business purposes in an organized way. A prepaid card may also come in handy for business expenses that can’t be paid for in cash.
4. No credit check: No credit check is required for most prepaid business debit cards. All it takes to receive a Netspend Small Business prepaid card is a short application and an ID.

The Bottom Line

Netspend offers prepaid debit cards with Mastercard or Visa branding. Cards can be funded in ways that are similar to how one might manage an online bank account. However, the fees associated with Netspend, whether it is pay-as-you-go or part of a monthly plan, are far greater than what you can get from a typical online bank.