A Roundup of Prepaid Credit Cards in Canada

There have been many changes in the world of one of my favourite pet subjects: prepaid credit cards.

Several dynamic products have come onto the scene, while others have followed in the paths of their less-illustrious cousins by cutting the benefits available to cardholders.

While some of the devaluations which have occurred might be disheartening, the slew of new prepaid payment products bears consideration. Indeed, there’s a degree of hidden value if you’re willing to think outside the box and look for it.

Commonalities of Prepaid Credit Cards

Before we get into the specifics, let’s revisit what a prepaid credit card is and why we should care about them.

First, as the name would imply, prepaid cards are paid in full in advance. You need to load the card before using it, usually via linking your bank account or by using Interac e-Transfer, Visa Debit transactions, or direct deposit. This makes prepaid cards 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 score to open an account.

Second, prepaid cards still function 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. Some, like Koho, offer services such as funds advances, but only 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 card 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. In the app, you can also track your spending by category in a separate tab, so that you can cut yourself off Starbucks when it’s eating into your rent.

The major prepaid card issuers go to great lengths to make these apps faster and more user-friendly than their competitors. This is a bit odd, though, as 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. Zut!

The Wise Card: A Powerful FX Solution

One of the most exciting releases of the past year has been the Wise Card, which is a prepaid Visa product that launched on November 30, 2021.

A recurring theme in the world of prepaid cards is that the products, including The Wise Card, are accessed primarily via apps. Wise also has excellent functionality on its desktop site, unlike some of the other options on its app.

Regardless, the Wise Card’s app interface is user-friendly and fast. All applications for the card must be made either through the app or via the desktop website.

Activate this card and add it to your wallet as the most electric green item you’re likely to carry around, and you’ll also realize it’s rather powerful.

While it doesn’t offer any rewards, it can be loaded in over 50 foreign currencies, and it can be used to wire money directly into foreign bank accounts for either yourself or your friends and family.

While there is a conversion fee between the various currencies, it’s much lower than the typical 2.5% on other Canadian credit products.

Overall, I think the product is very strong, and heartily recommended it as one of the best ways for the average consumer to turn their Canadian dollars into their freedom-loving American cousins.

However, I’m not without my conniptions. With Wise, it’s in the form of fees, fees, and more fees.

There’s a fee for pretty much everything, from transferring money into the app, to transferring to another bank account, and even for withdrawing from an ATM. Take a look:

While the conversion rates remain strong, the fees mean that Wise is best enjoyed in bulk, so as to mitigate the cost of transfer per dollar sent.

On the other hand, ATM withdrawals are better enjoyed in moderation, as they’re free for $350 (CAD) and under. Above this, they incur a fee of $1.50 per transaction, plus 1.75% of the net total. You’ll be withdrawing cash at the Wise rate, which is quite competitive, but the hidden costs are annoying.

I keep this card in my wallet, but I wish it stopped trying to squeeze around the edges. Then again, perhaps it was inevitable, given their rates.

No Longer By Invitation Only: The Wealthsimple Cash Card

A product I’ve been watching closely is the Wealthsimple Cash Card.

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 reasons I’m interested in learning more are 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 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.

Initially, one had to be invited to become a card member, apply to join the product’s beta test, or be a student at a targeted university. However, all of this changed over the winter of 2021, when applications opened to the public.

With Wealthsimple, the card might be black, but the Centurion it ain’t. Sadly, some of its promos, such as 5% cash back on restaurant and bar purchases during weekends, have gone the way of its invite-only program.

However, its benefits are still pretty good for a no-fee credit card: 

  • 1% cash back when placed into pure cash back, stocks, or crypto holdings (note that the latter two options have tax implications if they rise in value, so cash back may be preferable for a general user)
  • 1.5% cash back when placed into a Wealthsimple savings account (not ideal given current inflation)
  • No FX fees a welcome change!

Overall, the Wealthsimple Card got a bit of a shaky start, hidden as it was under the invite-only rug. Now that it’s been revealed, it’s a fairly solid card, and one which supersedes some of its competitors on this list in terms of features.

While it is a bit annoying to go through yet another sleek startup app, at least the product itself is user friendly, and the rewards breakdown is simple.

Pick one up if you get the chance.

Sort of Banking: The PC Financial Money Account

While it doesn’t have any sort of utility in the foreign exchange space, the PC Financial Money Account, a Mastercard product, distinguishes itself in the form of a hybrid prepaid credit card plus a daily banking solution.

While PC Financial doesn’t have the same footprint as the Big Five banks, it has plenty of ATMs available at most Loblaws-umbrella stores and Shoppers Drug Mart locations, so withdrawing cash shouldn’t be much of an issue.

Their call centres also tend to be decent, but their surcharges on making transactions over the phone corral the casual user to, you guessed it, the PC Financial app.

On top of the ATM cash withdrawals, the PC Financial Money Account does many of the standard transactions available to a normal chequing account, such as receiving payroll deposits, setting up preauthorized payments, or paying bills and credit cards.

The card also earns rewards in the form of Optimum points at a rate of 10 points for every $1 spent, a 1% earn rate. Of course, these points can only be used at retail stores owned by Loblaws, but at least it’s providing some kind of additional value to cardholders.

While this may not be much to write home about, it’s a good benefit for a product that acts as a surrogate chequing account. Good luck finding an equivalent Big Five offering that provides cash back above 0.25%.

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 it’s unique in the prepaid sphere, as 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 very quickly.

As I alluded to earlier, Koho is also alone in offering “funds advances.” If you elect to have your payroll deposit 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.

On the FX side, Koho charges “only” a 1.5% markup on foreign transactions. That’s better than most cards on the market, but still worse than Stack or No FX credit cards, such as the HSBC World Elite Mastercard.

Also of note is Koho Premium. For $9 a month or $84 a year, you can benefit from a number of perks:

  • Earn a flat 2% cash back on three categories
  • No FX fees
  • Withdraw up to $800 in cash at a time
  • Complimentary 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.

Unfortunately, this is no longer the case.

Mogo is a typical prepaid card that still charges normal FX fees of 2.5% and requires loads via e-Transfer and Visa Debit. But 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: it has a sleek card design, neat app 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, Mogo abolished the bitcoin cash back program back in 2021. 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 would be paid out in cash upon request.

How can I get to the moon without my BTC?

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).

No proof has been given of this ostensible tree planting, and as the internet knows: pics or it didn’t happen. Pass.

Stack: Unstacking Its Own Benefits

Last in our prepaid roundup, but first in shame, 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 modified their offering at a marginal, but not insignificant, pace.

The Stack card provides the typical prepaid benefits: fast deposits, a sleek app, and a vertically-designed 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 we used to love the Stack Prepaid Mastercard was simple: no foreign transaction fees. We don’t have nearly enough products like this in Canada.

Alas, all good things must come to an end. On February 1, 2022, Stack introduced a 2.5% foreign exchange fee, the standard on all major Canadian credit card products.

Their announcement laid out some further policies:

This is a significant downgrade from the previous policy, because the $350 required to be reimbursed must be in the form of transactions.

Withdrawing cash, one of the better previous uses for the card, will still incur the 2.5% ding, which is an unfortunate downgrade.

At the same time, withdrawals are very generous. You can take out 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.

These are standard-issue in the world of new fintechs, but with the added FX fees, I’ve seen no reason to retain my membership with this startup.

Blast from the Past: CIBC AC Conversion Card

The Air Canada Conversion Visa Card by CIBC, of ancient mass-points-earning fame, is still around.

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 or via a service such as Wise.

Worse yet, you’re 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 foreign transactions beats loading in foreign currencies any day.

Where to Learn More About Prepaid Cards

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 you can get a good idea about new products that 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.

Conclusion

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. Clearly, the products being launched prove that there is still more appetite in the financial services industry to provide more.

Until then, consider picking up a product or two that interest you. You can experiment with how to load them, make use of attractive features like Wise’s flexible foreign currency options, or maximize the other special offers that we often see from prepaids.

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