PayPal Prepaid Mastercard® review: Worth the fees?

The PayPal Prepaid Mastercard® prepaid card, offered by The Bancorp Bank and NetSpend, can be linked to your PayPal account once you’ve activated it, but watch out for fees. And if you don’t have a PayPal account, you won’t be able to access all of the features.

PayPal Prepaid Mastercard® pros and cons

Pros

• Can be linked to your PayPal account
• No fee for direct deposit

Cons

• Need PayPal account to access all features
• $4.95 monthly fee
• No credit reporting

The rundown: Everything we like about the PayPal Prepaid Mastercard®

If you have a PayPal account, the PayPal Prepaid Mastercard® could have some benefits for you.

Link to your PayPal account

The best feature of thePayPal Prepaid Mastercard® is its ability to link to your PayPal account. Linking lets you …

• Transfer money from your PayPal account to your card
• View your card’s balance and transaction history online
• Use PayPal’s online bill pay service
• Open a linked interest-earning savings account

The savings account can only be funded through your PayPal prepaid card. It earns an annual percentage yield of up to 5% on the first $1,000 of the total balance. Beyond that, it’ll earn an APY of 0.5% on the additional balance. These rates are promotional and variable, so they can change without notice.

Once your card is activated, you can direct deposit all or part of your paycheck, federal income tax refund, or certain federal and state government benefits directly to your card.

Reload at 130,000+ locations

You can also add money at more than 130,000 NetSpend locations. The minimum reload amount is either $10 or $20, depending on where you reload your card. The maximum reload amount is $500. Funds stored on your card are insured by the FDIC, and if your card is lost, damaged or stolen, you can get a replacement with all of your funds transferred to it for a $5.95 fee.

Heads up: What you should consider before applying for the PayPal Prepaid Mastercard®

If you’re not a frequent PayPal user, there may be better options out there.

Better for those with PayPal accounts

Though getting a prepaid card doesn’t require a bank account, if you choose the PayPal Prepaid Mastercard®, you’ll need a PayPal account to access all of the card’s features.

Activation hassle

You’ll also need to activate your card. The card you receive when you purchase it at a retail location is just a temporary card with limited functionality. You’re allowed 120 days (about four months) to complete the activation process, and it can be a hassle.

You’ll have to provide the following details so the issuer can verify your identity:

• Your full name
• Physical street address
• Date of birth
• Home phone number
• E-mail address
• Social Security number

Once your card has been activated, you should receive a permanent personalized card that replaces your temporary point-of-purchase card.

The fees

The PayPal Prepaid Mastercard® comes with a variety of fees. For starters, you’ll pay a plan fee of $4.95 per month, and the first month’s fee will be deducted from your account within 36 hours from the first time you load the card. The fee to get cash from an ATM is $1.95, plus any bank or ATM operator fees. The ATM owner fee is waived if you use an MoneyPass Network ATM.

It’s important to know that some fees aren’t set or disclosed by PayPal but instead depend on where you use the card and for what services. For example, you may have to pay a fee to reload your card, but the amount can vary depending on where you do it.

It won’t help you build credit

A prepaid card isn’t a credit card or debit card, and it won’t help you build or repair your credit history. That’s because neither the account nor any information associated with it is reported to the three main consumer credit bureaus.

If better credit is your goal, a secured credit card might be more appropriate for you, says Ben Jackson, chief operating officer at the Innovative Payments Association, a trade group for the prepaid card industry.

Do the math: How to get the most out of the PayPal Prepaid Mastercard®

Whether you should use a prepaid card depends on what you need from financial services.

This type of card can help you receive direct deposits, make purchases online and budget your money more effectively. Those benefits may be valuable if you have little or no credit history or you want to avoid having debt.

“Individuals can use prepaid cards to avoid checking account, money order and check-cashing fees, while still being able to safely store funds, pay bills online and share money among family members with companion cards,” Jackson says.

Plus, there’s typically, no credit check required to get a prepaid card. A prepaid card stores money that you preload onto it, so there’s no debt involved. No debt means there’s no need for a credit check, so major issuers don’t require one.

The competition: How the PayPal Prepaid Mastercard® stacks up against similar cards

• American Express Serve Cash Back®: You’ll get 1% cash back added to your account when you spend with this card.
• Mango Prepaid Mastercard®: A high annual percentage yield for a linked savings account makes the Mango Prepaid Mastercard® a potential winner if you’re looking for a prepaid card.

Bottom line: Is the PayPal Prepaid Mastercard® right for you?

This prepaid card might be a good choice for you if you love all things PayPal, you’re not trying to build or repair your credit, and you’re willing to research the fees that might apply to how you want to use the card. But if none of those apply to you, there may be better options out there for you.