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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 A payday loan 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 Is A Payday Loan With 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.

Warning: Payday loans are extremely expensive and can lead to a cycle of debt if you’re unable to repay the full amount borrowed. To Learn about the payday loan laws in your province, click here.

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 CardDirect Deposit
Where to Apply– In-person
– Online
– In-person
– Online
AmountUp to $1,500Up to $1,500
Funding TimeUp to 3 business daysSame day via e-Transfer
(depending on time of day you apply)
Best Option For– Consumers without a bank account
– Emergencies
– Emergencies
– When you need the money right away

Which Lenders Offer Payday Loans Loaded Onto Debit Cards?

AmountPrepaid Card
$100 – $1,500Opt+ Prepaid MastercardLearn More
$120 – $1,500Titanium+ Prepaid MastercardLearn 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 debt it may cause.  
  • 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.

Consider a personal loan instead

$
100% FREE. NO OBLIGATION.

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)

FAQs About Prepaid Debit Card Payday Loans

How long does it take to apply for a debit card payday loan?

The application process is typically very quick and should take you no more than 10 minutes. Receiving your loaded debit card could take up to 3 days, depending on when you applied and the lender you chose.

What kind of fees can I expect to pay with a prepaid debit card payday loan?

Remember, a payday loan can come with very high service and administrative fees, even if it’s on a prepaid debit card from a reputable lender. These fees can include:
  • 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?

Yes, most payday lenders can load another loan onto your debit card at your request, as long as the balance of your first loan is already paid off in full (although this depends on your province or territory). In addition, you can deposit other types of funds directly onto your card, such as government benefits or a paycheque.

Should I take out a payday loan or a personal loan?

Generally speaking, payday loans should always be avoided unless you have no other option. A personal loan from a big bank or alternative lender is much easier to manage with affordable payments and a lower interest rate. 

Can I get a loan without a bank account?

Pawn shop loans and payday loans funded via cash or prepaid card are the main loan options for consumers who do not have bank accounts.

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     

Bryan Daly avatar on Loans Canada
Bryan Daly

Bryan is a graduate of Dawson College and Concordia University. He has been writing for Loans Canada for five years, covering all things related to personal finance, and aims to pursue the craft of professional writing for many years to come. In his spare time, he maintains a passion for editing, writing screenplays, staying fit, and travelling the world in search of the coolest sights our planet has to offer.

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