Do Prepaid Cards Have Chips?

Do Prepaid Cards Have Chips?

October 21, 2020         Written By Lynn Oldshue

If you have limited or bad credit, prepaid cards give you the ability to pay for goods and services online or via an app. Some even report to the three credit agencies, so responsible usage can help increase your credit score and enable you to qualify for traditional credit cards and better interest rates on loans.

Not all prepaid cards are equal, though. Some do not have the EMV chips that make your transactions more secure.

EMV, which stands for Europay/Mastercard/Visa, cards were introduced in Europe in the 1990s but just made it to the United States a few years ago. Traditionally, cards in America were processed with a magnetic strip. The problem with these older cards is that all of the information a thief would need to commit fraud was contained on the strip. With EMV cards, though, the computer chip embedded in the card creates a unique transaction code when the card is processed. Since this code changes, it is much harder for thieves to steal information that could be used to commit fraud.

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Because EMV cards are so much safer, before applying for a prepaid card, you should check to see if the card is EMV-compatible. One prepaid card that is EMV compatible is the Chime card. Chime does not run a credit check, charges no monthly or transaction fees, comes with an optional free savings account and works with Uber, Lyft, and car rental companies. Additionally, you can use ATMs for free at over 30,000 locations. Simply use the Chime mobile app to search for eligible ATMs.

In addition to these perks, the Chime card makes it easier to save. You can opt to have purchases rounded up so any spare change will be deposited into your savings account. Additionally, you can have 10% of your paycheck directly deposited into your savings account. The mobile app also makes it easy to track your spending and create a budget.

Why might you consider a prepaid card instead of a traditional credit card? First, if you have a low credit score or are still building credit, a prepaid card will allow you to purchase goods and services without turning to cash. Additionally, a prepaid card can help you build credit.

Secondly, prepaid cards can also help you keep to your budget. Some people load their prepaid cards with the exact amount of money they want to spend in a particular category each month. Once the money is spent, they know they have reached their budgeted amount and should stop spending in that category. For example, if you are someone who spends too much money on entertainment each month, you could load the amount you want to spend on dining and movies onto a prepaid card. Once you run out of money, you will know your entertainment budget is done for the month. This can help you devote more to savings and be more mindful of your spending on discretionary expenses.

The information contained within this article was accurate as of October 21, 2020. For up-to-date information on any of the terms, cards or offers mentioned above, visit the issuer's website. Many of the offers on this article are from our affiliate partners, and LowCards.com may be compensated if you take action with any of our affiliate partners.

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lynn-oldshue

About Lynn Oldshue

Lynn Oldshue has written personal finance stories for LowCards.com for twelve years. She majored in public relations at Mississippi State University.