3 Best Prepaid Credit Cards In Canada (Sep 2023)

What Is A Prepaid Credit Card?

Prepaid credit cards are a type of credit card that allows you to make purchases using funds you loaded into the card, instead of using a line of credit. In a way, they’re similar to debit cards, but prepaid cards offer benefits like cash back, no foreign exchange fees on online and in-person purchases, and some unique perks like free financial coaching and early access to your payroll.

Most prepaid credit cards in Canada have very low fees and there are plenty of no-fee options. Keep in mind that, unlike traditional credit cards, prepaid card users don’t borrow money from credit card companies – instead, you have a credit limit equal to the amount of your security deposit. These cards don’t have a credit score requirement, because technically they’re not lending you any money. This type of card will not help you build your credit score – or affect it in any way.

Without further ado, here are the best prepaid credit cards Canada has to offer:

The Best Prepaid Credit Cards In Canada

1. KOHO Mastercard Prepaid Card: Best for promotional cash back rates and no annual fees
2. STACK Prepaid Mastercard: Best for travel rewards and insurance
3. KOHO Premium Reloadable Prepaid Mastercard: Best for no foreign exchange fees and saving tools

How Do Prepaid Credit Cards Work?

Prepaid credit cards are an alternative form of payment where you deposit funds which can then be used to make purchases. The amount you can spend using these cards is limited by how much you deposit.

Credit card companies make money off these types of cards through several means. For starters, these cards don’t pay interest on balances – that means you’re trading off the (albeit low) interest from bank accounts for a card that doesn’t require a bank account. Some prepaid cards also charge annual fees, reload fees (applicable whenever you top up your card), and transaction fees.

Like regular debit and credit cards, prepaid cards are accepted wherever the card network provider is accepted. In Canada, both Visa and Mastercard are the most widely accepted networks, but American Express is also accepted nationwide.

Pros & Cons Of Prepaid Credit Cards

Pros: Why A Prepaid Credit Card May Be Worth It

• You don’t need a high credit score to apply for a prepaid card – any score will do
• Make transactions and never incur any debt or pay any interest
• Can be used as travel cards when travelling abroad
• Avoid overdraft fees and help you budget
• You don’t need a bank account to use a prepaid card

Cons: Why A Prepaid Credit Card May Not Be Worth It

• Prepaid credit cards will not help build your credit
• Prepaid card users have a strict daily limit
• No interests on your balance

Types Of Prepaid Credit Cards In Canada

#1 General Purpose Reloadable Prepaid Cards

Also known as open-loop prepaid cards, general-purpose prepaid cards can be used like debit cards to make purchases. They can be used wherever the network, usually Mastercard or Visa, is accepted. These can be easily reloaded at any time, either with direct payments or transfers from another bank account or even with cash at select retail stores. Keep in mind you may have to pay a reload fee. These cards usually don’t have any extra perks and have no annual fee.

#2 Travel Prepaid Cards

This type of prepaid card is specially tailored for travelling abroad. These cards usually have lower foreign transaction fees and allow users to instantly exchange their money loaded on the card for local money. One thing to keep in mind is the exchange rates; card issuers set their own rates, so it's worth looking around for the best deals. One of the main benefits of these cards is that you won’t need to get the local currency or carry lots of cash on you. However, keep in mind that, like many regular cards including the Gold Card from American Express and even higher-end cards like the Platinum, these prepaid cards usually charge a foreign transaction fee in the range of 1% – 3%.

#3 Cash Back Prepaid Cards

Cash back prepaid cards usually have the highest annual fees among prepaid cards. These cards come with decent cash back rewards when purchasing at select retailers or particular categories, and you can expect a cash back rate from 0.5% to 2% on most everyday purchases. Annual fees for these cards range from $50 to $90 per year.

How To Choose A Prepaid Credit Card In Canada

Network Used

One of the first things you should look at is the network it uses. In Canada, Visa and Mastercard are accepted almost everywhere, but If you are shopping for a prepaid card, you need to make sure it is accepted at your favorite stores. For example, stores like Costco and Walmart Canada don’t accept Visa.

Monthly Fee

In general prepaid credit cards don’t charge monthly fees, but there are a couple, like the Refresh Financial Secured Card and the KOHO Prepaid Visa Card, which charge from $49 to $84 per year but include benefits that are seldom seen in prepaid cards, like cash back. Some prepaid cards waive this fee entirely if you set up direct payments or create a bank account with them.

Cash Reload Fee

Another fee that is worth keeping in mind is the reload fee. The limit of prepaid cards is usually from $5,000 to $10,000; ideally, you will top up your card as few times as possible to save up on these fees. You can save up on some of these fees by setting up direct payments like the monthly fee.

ATM Withdrawal Fee

Prepaid cards are a great way to purchase at stores that don’t accept cash – but should you do when you need cash? Prepaid cards can also be used to withdraw cash from ATMs or select retail stores, but it comes with a fee. If the bank that issued the prepaid card and the ATM where you’re trying to withdraw from use different networks, you may be charged an ATM fee, depending on your card's terms. ATM fees are usually from $1.50 to $2.50 per transaction.

Foreign Transaction Fees

If you’re a frequent traveler and find yourself making a lot of purchases in foreign countries, you need to consider foreign transaction fees. Usually, these are a percentage that ranges from 2% to 2.5% of the total amount.

Inactivity Fees

Finally, inactivity fees. Prepaid credit cards like the Mogo Visa* Platinum Prepaid Card charges a fee of $1.99 that triggers after 365 days of inactivity.

Rewards

In general, prepaid cards are not great for earning rewards. There are some, like the KOHO Prepaid Visa Card that offer cash back, but they’re pretty rare, and they usually come with an annual fee, which defeats the purpose of budgeting – considering you may not spend enough to earn cash back and offset the fee.

Insurance

In Canada, prepaid credit card holders can opt-in to have their balances insured by the Canada Deposit Insurance Corporation (CDIC) for up to $100,000, including principal and interest. Keep in mind that this only applies to federally regulated fintech companies or banks; make sure the card you choose is eligible for this insurance.

How To Apply For A Prepaid Credit Card In Canada

Age

In Canada, the minimum age to request a credit card is the age of the majority. Teens under that age can’t get approved for credit cards but can be added as authorized users to one of their guardian’s or parent’s credit cards. For reference, the age of the majority in Alberta, Manitoba, Ontario, Quebec, Prince Edward Island, and Saskatchewan is 18 years old. In all other provinces, the age of the majority is 19.

Residency Status

Canadian prepaid credit cards are available to residents and non-permanent residents. You don’t need a credit history or a bank account for most prepaid cards. However, some prepaid cards with cash back benefits may require you to have at least a temporary resident status.

Credit score

Prepaid credit cards do not require a good credit score or, in most cases, a credit score at all. By design, credit card companies don’t take on any risk by issuing prepaid cards, and cards are approved instantly without credit score checks.

Income And Bank Account Requirements

Prepaid cards don’t have any income requirement, similar to secured credit cards. In fact, you don’t need even need a bank account; prepaid cards are a great option for the unbanked and people with low credit scores.

Prepaid Credit Card FAQs

Are Prepaid Credit Cards worth it?

When cash back cards might be worth it for you:

• If you don’t have a bank due to residency issues or otherwise but would like to receive payments directly to one of the major networks like Visa and Mastercard, you should consider a prepaid credit card
• If you have a poor credit score or no credit history, a prepaid card is a great option for you
• If you find yourself making a lot of purchases with merchants that don’t accept cash and don’t have a debit or regular credit card, a prepaid credit card is for you
• If you want to avoid overdraft fees, control your spending, and keep credit card debt under control, a prepaid credit card may be for you

When cash back cards might not be worth it for you

• If you’re looking to build your credit score
• If you’re looking for a card that can carry balances
• If you want to earn interest on your deposit; prepaid cards don’t pay interests

What Is The Best Free Prepaid Credit Card In Canada?

The best free Prepaid Credit Card in Canada is the KOHO Prepaid Visa Card. It comes with 0.5% cash back on all purchases with the option to increase it to 1% and has both a free and a premium plan.

Can The Government Track My Prepaid Credit Card

It depends. The government can only track your card if you had to provide your personal information during the signup process. Alternatively, some prepaid cards require only a valid Canadian address.

How Much Can You Put On A Prepaid Credit Card?

The limit of how much you can put in your prepaid card is usually around $15,000. This will depend on the particular card you choose, and, depending on the issuer, there may be some limitations. It’s very common for cards to have a $3,000 per transaction limit or a daily spending limit of $5,000.

Do Prepaid Cards Have A Fee?

It depends. Prepaid cards usually don’t have an annual fee, but some premium cards include perks like cash back on purchases, interest on your balance, and free credit monitoring – those cards tend to have an annual fee.

What Are The Disadvantages Of Prepaid Cards?

The main disadvantages of prepaid credit cards are:

• Prepaid cards will not help build your credit
• Prepaid cards usually have a spending limit
• Prepaid cards don’t have a lot of perks compared to other credit cards

Can Prepaid Cards Mess Up Your Credit

No. Prepaid cards will not affect your credit score. They will not lower it nor help you rebuild it.

Are Prepaid Cards Accepted Everywhere?

Not necessarily – it will depend on the network. For example, stores like Costco and Walmart Canada don’t accept Visa. In general, Mastercard and Visa are the most widely accepted networks in Canada.