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While banking technology is always evolving to be more inclusive, a surprising amount of people still can’t qualify for a basic bank account. In fact, according to a study done by ACORN Canada, about 3% – 15% of our residents are “unbanked” or “underbanked”, meaning they have little to no connection with any of the country’s financial institutions.
Unfortunately, not all of those residents are lacking a bank account by choice. Millions of them are simply getting turned down. Luckily, if you’re dealing with a similar financial crisis, there are ways to access fast cash, like payday loans with a prepaid debit card.
What Are Prepaid Debit Cards?
A prepaid debit card is similar to a normal debit card, only it has a specific amount of money preloaded on it, rather than the funds coming straight from your chequing account. Prepaid debit cards are also often compared to gift cards. Many different financial institutions and businesses offer these kinds of cards as products or bonuses. Once the card funds are used up, the card can be reloaded or disposed of.
What Are Payday Loans That Use A Prepaid Debit Card?
A payday loan is a small high-interest loan of $100 – $1,500 and a short repayment term of 14-days following the transfer of funds. While these loans are usually given by direct deposit, cash or cheque, many payday lenders now offer debit cards specifically for customers who don’t have bank accounts or are simply looking for more convenience.
How Do Prepaid Debit Card Payday Loans Work?
You can apply for a payday loan in person or online, depending on the lender you choose. Once approved, the payday loan is loaded onto a prepaid debit card. Now you can use the debit card to make in-store purchases, take out cash from an ATM, and even make online purchases (depending on the types of payment the retailer accepts).
You’ll have to repay the funds, plus interest and fees by a predetermined due date (typically within 14 days) or be subject to certain penalties.
Most payday lenders will request a VOID cheque or pre-authorized debit form when you apply. This would normally allow them to deposit the loan directly in your account but in this case, it’s so they can withdraw the amount you owe automatically from your account on the due date.
Prepaid Card Payday Loan vs. Direct Deposit Payday Loan
|Prepaid Card||Direct Deposit|
|Where to Apply||– In-person|
|Amount||Up to $1,500||Up to $1,500|
|Funding Time||Up to 3 business days||Same day via e-Transfer |
(depending on time of day you apply)
|Best Option For||– Consumers without a bank account|
– When you need the money right away
Which Lenders Offer Payday Loans Loaded Onto Debit Cards?
|$100 – $1,500||Opt+ Prepaid Mastercard||Learn More|
|$120 – $1,500||Titanium+ Prepaid Mastercard||Learn More|
Benefits Of Receiving A Payday Loan Via A Prepaid Debit Card
Despite their downsides, payday loans with a prepaid debit card can come with some notable benefits, including but not limited to:
- No Bank Account Needed – The best thing about payday loans with a prepaid debit card is that you don’t need a checking account to qualify, which is great if you aren’t affiliated with a bank or don’t want to risk your existing account.
- Fast And Easy Funding – If you’re not in a rush, a prepaid debit card can be an easier way to shop or pay bills online, over the phone and in-store. You can even reload the card with another loan or use it to withdraw funds from an ATM.
- Direct Deposits – Depending on which kind you have, a prepaid debit card can carry all sorts of payments, not just payday loans. That means you can access the money from a paycheque, benefit plan, or tax refund by direct deposit onto your card.
- Access To Rewards – When used enough, some prepaid debit cards come with financial benefits, like cash-back dollars, bonus points and insurance. However, this also depends on what type of card you apply for and where you get it from.
- Bad Credit Is Accepted – It can be tough to qualify for any financial product or service if you have a bad credit score (300 – 600). But payday loans do not require a credit check, therefore consumers with bad credit can typically get approved.
Risks Of Receiving A Payday Loan Via A Prepaid Debit Card
All benefits aside, don’t forget that payday loans come with a few serious financial drawbacks, even when they’re given to you on a prepaid debit card:
- High-Interest Rates and Fees – The riskiest thing about payday loans is that they come with extremely high-interest rates upwards of 300% – 600% APR. As well as many different service fees, such as loan origination and documentation. This could make your loan very expensive and not worth the potential damage to your financial health.
- Short Repayment Periods – The average payday loan term is only 14-days after receiving the funds. While some lenders offer longer plans, this can be especially dangerous if you borrow money frequently and your lender allows “rollovers” (borrowing another loan before your first is fully paid).
- Unlicensed Lenders – Most legitimate financial institutions don’t offer these types of loans via prepaid debit cards. So, you may need to apply with an alternative payday lending company. Just keep in mind that this comes with some risk and you may be opening yourself up to potential scams.
Before applying for a payday loan, know your rights as a borrower.
How To Apply For A Debit Card Payday Loan
To apply for a payday loan on a prepaid debit card, you may need to provide the following personal and financial documents:
- One or more pieces of government ID (passport, driver’s license, etc.)
- Proof of your address and contact information (utility bill, etc.)
- Your Social Insurance Number (SIN) and date of birth
- Proof of your income (recent bank statements and/or pay stubs)
- A pre-authorized debit form or VOID cheque (if using a bank account)
To qualify for a payday loan of any kind, you must:
- Be past the age of majority in your province/territory (18 – 19+)
- Be a citizen of Canada or a permanent resident with proof of address
- Have a steady income (usually a minimum of $1,000 – $2,000 per month)
How long does it take to apply for a debit card payday loan?
What kind of fees can I expect to pay with a prepaid debit card payday loan?
- Loan origination fees
- Document processing fees
- Cheque handling & cashing fees
- Money transfer fees
- Debt collection fees
- Late & NSF (non-sufficient funds) penalties
Can I add another payday loan to my prepaid debit card?
Should I take out a payday loan or a personal loan?
Can I get a loan without a bank account?
Use Payday Loans With Caution
Getting a payday loan with a prepaid debit card can be an easy and convenient way of financing an important expense when you don’t have enough savings. However, don’t forget that payday loans come with many risks and costs that can make them harmful to your finances. Only apply for a payday loan if you have no other choice
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