Of late, it’s been easy to get lost in the kerfuffle of the insane advancements going on in the Miles & Points world.
The Summer of American Express was followed by American Express Presents: The Fall of Referral Love. TD offered a targeted offer for 45,000 Aeroplan points. MBNA decided that they’d welcome Halloween month with statement credits instead of candy.
To celebrate these momentous movements in Miles & Points, many of you joined me at the Prince of Travel Signature Event in Vancouver! I’m sure more than a few returned much like I did: with a slight, albeit temporary, aversion to bright lights and a voice hoarse from merrymaking.
Today, I want to take a step back from all that. I’d like to invite you to join me in considering the prepaid credit card market.
This is an area that has not captivated our collective conscience because it doesn’t appear to relate to Miles & Points at first glance. However, I think it’s one that bears consideration and has a degree of hidden value if you’re willing to think outside the box.
Commonalities of Prepaid Credit Cards
Before we get into the specifics, let’s ask ourselves: what is a prepaid credit card and why should I care about them?
First, as the name would imply, prepaid cards are paid in full in advance. You need to load the darn thing before using it, usually via linking your bank account, Interac e-transfer, Visa debit transactions, or direct deposit (if you choose to set it up via your work payroll). This makes them a bit like a chequing account.
However, unlike a chequing account, you’re not required to follow any kind of ancient and byzantine set of regulations about minimum balances, nor are you required to pay any kind of fees.
Even better, unlike traditional bank accounts, I haven’t once received a hard pull to my credit to open an account!
Second, prepaid cards work a bit like credit cards because they’re still integrated into the Visa or Mastercard networks. This allows them to work with lightning speed.
Prepaid cards differ from regular credit cards because they don’t require the issuer to lend you significant amounts of money – although some, like Koho, will offer services such as funds advances under specific circumstances.
Prepaids also acknowledge something many of us don’t want to admit: at some point in our lives, most of us were bad with money. The appeal of the prepaid factor is that you can load whatever quantity of money you wish to limit yourself to, be it $1,000 or $15.
To support the theme of budgeting, each prepaid provider has a millennial-oriented app to make you feel groovy about paying your landlord (and to track your spend by category in a separate tab so that you can cut yourself off Starbucks when it’s getting to 50% of rent).
The major prepaid card issuers go to great lengths to make these apps faster and more user-friendly than their competitors – even though they’re all underwritten by the same company, People’s Trust Bank of Canada.
Lastly, like many new financial products, few prepaid credit cards are available in Quebec. Tabernouche.
No FX Winner: Stack Prepaid Mastercard
The first card in our prepaid roundup is the Stack Prepaid Mastercard. Ricky wrote about this product all the way back at its launch in 2018, and over time the Stack team has improved their offering at a marginal, but not insignificant, pace.
The Stack card provides the typical prepaid benefits: fast deposits, sleek app, vertical card for flexing on all your friends. In lieu of cash back or points, it has Stack Offers, which consist of discounts on everyday purchases at specific retailers. The amounts aren’t anything to write home about, but it is a nice little bonus.
The reason I’m listing Stack first in my list is because in my estimation it’s the best prepaid product on the Canadian market. This is because of Stack’s main selling point: no foreign transaction fees. We don’t have nearly enough products like this in Canada.
The convenience factor of this shouldn’t be underestimated. When I was in Brazil, credit card acceptance rates were high, but many places were still cash-only. If you’re looking to keep a strict budget without the “pay for it later” mentality, then Stack would have been a great alternative for places that did take cards – and because it’s prepaid, it’s less risky to use in a foreign ATM.
Another notable advantage is that the card isn’t confined to loads via the “standard” methods of bank account linking, Interac e-transfer or Visa Debit – you can also load Stack via debit at Canada Post outlets or select retailers, which can be looked up here.
Finally, withdrawals are very generous: up to $5,000 in cash or spending per day once you’ve received your physical card, and your virtual on-app card can be used from the moment your Stack application is approved!
A Solid Contender: Koho Prepaid Visa
The next card on our roundup is the Koho Prepaid Visa, which provides 0.5% cash back on every transaction. This is nothing to write home about, but is unique in the prepaid space: it indicates that the issuer is willing to split their interchange revenue with the customer.
The card can be loaded by Visa Debit and Interac e-transfer, and I find their e-transfer loads to be superior. Unlike many of the other companies on this list, Koho has enabled auto-deposit. No annoying security questions and answers here: the money loads fast.
As I alluded to earlier, Koho is also alone in proffering “funds advances.” If you elect to direct deposit your payroll onto your Koho, you can access up to $200 of that pay in advance of the funds clearing. I don’t really understand the utility of this, but it is a feature.
Also of note is Koho Premium: for $9 a month or $84 a year, you earn a flat 2% cash back on three categories, are charged no foreign exchange fees, can withdraw up to $800 in cash at a time, and have access to free financial “coaching” from Koho’s staff.
For the fee, I’d like to see more and better features, especially as 2% cash back on three categories is already provided for free with the Tangerine World Mastercard. Still, this is a positive indicator that some of the prepaid issuers are trying to widen their rewards portfolio.
Oh, and you can also buy pre-loaded Koho cards at Best Buy.
A Cautionary Tale: MogoCard
How the mighty have fallen. Mogo used to be one of my favourite prepaid cards due to their lightning-fast Visa Debit load times (and open-mindedness around which Visa Debit cards to accept) as well as generous bitcoin cash back. This is no longer the case.
Mogo is a typical prepaid card that at present still charges normal FX fees of 2.5% and requires loads via e-transfer and Visa Debit – though good luck getting the latter to work. I’ve recently seen top-ups fail repeatedly for hours or even days via Visa Debit.
Load issues aside, Mogo is fairly standard: sleek card design, neat app complete with monthly Equifax credit monitoring, and the usual homilies to budgeting. With a great rewards structure, this would make for a fantastic prepaid product.
Alas, they recently abolished their own bitcoin cash back program. As originally conceived, it was a neat gimmick even if your 1–2% earn wasn’t actually in “owned” bitcoins, but in cryptocurrency owned by the company which they’d pay out in cash upon request.
Unfortunately, Mogo can no longer be seen as competitive because they’ve arbitrarily replaced their bitcoin cash back with the nebulous reward of “CO2 offsetting” by planting trees in the Amazon (or so the tropical music in their app implies).
I’m sorry, but I’m skeptical as to the exact mechanisms by which this offsetting is allegedly accomplished, and more importantly, saving the rainforest won’t pay my mortgage. Pass.
Invite Only: Wealthsimple Cash Card
A product I’ll be watching closely is the Wealthsimple Cash Card – but not because of the card itself.
As a prepaid product, the Cash Card is quite typical: it’s integrated into the attractive Wealthsimple app, features pretty black-and-gold design on the physical card, and exclusively loads via bank account linkage (no Visa Debit or e-transfers).
The reason I’m interested in learning more is threefold. The first reason is because it’s integrated into Wealthsimple Cash, an add-on to Wealthsimple’s app designed to allow you to send money to and from your friends quickly, or to split bills such as bar or restaurant spending on the spot.
I’m curious how the Cash Card will play into the Wealthsimple Cash integration, or if it’ll result in any other meaningful benefits in the future.
Unlike the other prepaids on this list, the Wealthsimple Cash Card isn’t available to the public. You can only get the product if you’ve signed up for the product’s beta, received a personalized invitation, or attend a targeted university.
If you have gotten the card, its current promotion earns you a whopping 5% cash back on restaurant and bar purchases from 12:01am on Friday to midnight on Sunday every weekend, up to $20 per week.
While that isn’t as generous as travel rewards cards such as the American Express Cobalt Card, it does blow other prepaid rewards out of the water, and beats out the $120-a-year BMO eclipse Visa Infinite on weekends.
I suspect the Wealthsimple Cash Card has a lot more in store for us, and I’m curious to learn more once the secrecy is lifted and the product officially launches to the public.
Blast from the Past: CIBC AC Conversion Card
The Air Canada Conversion Visa Card by CIBC of ancient manufactured spending fame is still around, but don’t get any cute ideas. Its ability to allow you to print large quantities of points is long since dead and buried.
I’ve included this card on the list because I think it highlights a failure of these older-school prepaids versus the new ones: this card has no special features aside from the ability to load in foreign currencies. For example, if you want Turkish lira, you can load the card in that denomination.
However, this means you’ll be stuck paying the exchange rates set by CIBC, which will be far less competitive than through a No FX card like Stack or via a service such as TransferWise.
Worse yet, you’ll be obligated to spend in the loaded currency! If you have no use for those lira, you’ll have to convert back at extortionate rates once more. No thanks!
Take a pass on this option, but if any interns at CIBC or Air Canada are reading, this card needs a makeover even more than my grubby wardrobe. No fees on FX transactions beats loading in foreign currency any day.
Where to Find Out More
If you’re curious to learn more about the growing world of prepaid credit cards, I’d definitely recommend you follow the Canadian Prepaid Providers Organization (CPPO) website.
This is a great place to get news from the industry’s main public relations arm, and can give you a good idea for what new products might be launching soon.
I definitely am thankful for the convenience and flexibility of all the innovative new features that we continually see from prepaid cards, such as instant Visa Debit loads, no foreign exchange fees, payroll direct deposits, and generous ATM withdrawal limits.
Prepaid cards offer an interesting look into the future of the Canadian personal finance market. As traditional banks shrink, will these new products be able to live up to the hype and become a dominant form of payment solution?
It’s still early days for the industry, but I’m looking forward to finding out what tricks prepaid credit cards have in store.
Until then, consider picking up a product or two that interest you and experiment with how to load them, make use of attractive features like Stack’s No FX foreign ATM withdrawals, or maximize the other special offers that we often see from prepaids.