Prepaid Debit Cards with Checks

Adam Rust

It sounds impossible, but in fact, some prepaid debit card accounts come with check writing privileges.

I’m going to explain how it works because the process isn’t the same as it would be for a traditional checking account. Remember, one of the most important features with a prepaid debit card account is that it is designed to keep cardholders from being charged for overdraft fees. The prepaid card companies invented a new method to make it possible to do both: write checks and avoid over-drafting your account.

Why would a prepaid card company go to so much trouble to let consumers use checks? Isn’t that a bit outside of their line of business? Well, it turns out that lots of prepaid card holders still want to write a check from time to time. People find that a check is the most convenient way to pay a babysitter, to make a donation, or to make a payment to a friend. Sometimes a landlord will prefer to receive rent by check instead of through a money order or in cash.

Of note, on a technical level, some of the cards that appear to be prepaid debit cards are defined under a different name. To bankers, these cards operate under the name "demand deposit" account. But for all intents and purposes, consumers use them just as they would use a traditional prepaid debit card. But having acknowledged this minor difference, let's move on to a more important question: How do they work?

1)      You request a book of checks from your prepaid card company. Usually, you can do this in any number of ways: over the phone, via the app, or online.

2)      The card company sends you a set of between five and fifteen checks. It may take a few weeks to receive the checks in the mail.

3)      The check looks like any other check, except that in addition to the regular parts, it also has a space set aside where you will write a confirmation code.  

4)      You determine that you would like to rent a check. You go online or through the account’s app to seek a pre-authorization. You must tell the bank how much you intend to spend.

5)      The card company debits your account immediately for the amount of the check. Because you and the bank know the exact cost, the check won't bounce. Because your account’s balance is adjusted already, there is no chance that the payment triggers an overdraft fee.

6)      The card company sends a confirmation code.

7)      You write the check.

8)      You print the confirmation code on the check. The unique one-time code matches the previously arranged payment with this check, thus ensuring that the bank knows that you wrote the check for the correct amount of money.

Your paper check will look the same as one drawn from any other bank. Some people will not accept one of the blank checks that a bank might give you before you get your regular book of checks. That is not a problem here. The check will have your name, your routing number, and your account number – just like a check from a traditional checking account.

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