Prepaid cards in Canada: how a prepaid credit card works, the best ones and Vanilla

A prepaid card, often searched for as a prepaid credit card, is a payment card that spends a balance loaded on it: the Financial Consumer Agency of Canada (FCAC) says the merchant takes each purchase from the card’s balance. That is what sets it apart from a credit card, which lends money that is paid back later, as Wealthsimple puts it for its own prepaid card. The ranking below orders these prepaid cards by what each costs a year to hold, and first place goes to the KOHO Core plan prepaid Mastercard and Wealthsimple Visa Platinum prepaid card, tied. The Vanilla prepaid cards have their own section.

How does a prepaid card work?

Money goes on the card first, and FCAC says a card with a payment network’s logo can be used at most merchants that accept that network’s credit cards. FCAC’s points on using one:

• FCAC says a prepaid card is a payment card you can use to make purchases, that it can be physical or electronic, and that when you use it the merchant deducts the purchase amount from the balance on the card.
• FCAC says a merchant can decline a prepaid card if it doesn't accept prepaid cards as a form of payment, if the balance isn't enough to pay for the purchase, or if there's a hold on the funds on the card.
• FCAC says some businesses, such as restaurants, pay-at-the-pump gas stations, hotels and car rental agencies, may put temporary holds on the money on the card, which may limit how much money is available to spend.
• FCAC says you must register your prepaid card to be protected from unauthorized transactions if it is lost or stolen, and that to register you usually need to give the issuer the card's registration number and your contact information.
• FCAC says you generally can't cancel a prepaid card and get your money back, that the only way to access the funds is to use the card, and that some card issuers cancel the card for a fee that is deducted from the remaining balance.

Prepaid cards in Canada, ranked by yearly cost

These prepaid cards are listed from the lowest yearly cost to the highest, with each card’s plan fee, what it earns and its foreign transaction fee.

A dash means this table shows no figure for that card. Welcome offers, first-year fee waivers and fee rebates tied to a bank account, banking package, profession or another card are not included.

KOHO’s site lists the Core plan at no monthly cost. Its cash back applies to groceries, transportation, and eating and drinking.

This card is available to holders of a Wealthsimple chequing account, and Wealthsimple says there’s no fee for the card itself and no monthly account fee. The account itself is compared with other chequing accounts on best chequing accounts.

KOHO prices the Extra plan lower on a yearly plan than month to month, and the table counts the yearly-plan price. Who issues the card, who holds the money and KOHO’s Credit Building tool are in the Core entry.

This plan, too, costs less a month on a yearly plan than month to month, and the table counts the yearly-plan price. Its cash back rates are in the line above.

Fees to check on a prepaid card

FCAC lists fees that may apply to a prepaid card, depending on the card: fees to activate it, make purchases, check the balance, withdraw money from an ATM and cover overdrafts, and fees to customize or replace the card, load more money, transfer the remaining funds onto a new card, maintain the card if it isn't used for some time, or keep it active each month. The plan fees of the cards ranked above are in the table.

FCAC says that if a prepaid card has an activation fee, the fee is taken from the money on the card, that the activation fee is paid only once and that it isn't refundable.

Your rights under the federal prepaid card rules

FCAC describes federal rules that apply to prepaid cards from federally regulated financial institutions:

• The rules bind federally regulated financial institutions, such as a bank or federal credit union, that issue prepaid cards; they do not apply to prepaid cards issued by provincially regulated financial institutions or by retailers.
• The institution can't set an expiry date on the funds loaded onto a prepaid card (the card itself can expire); a promotional card may have an expiry date on its funds, shown on the card and in a statement before it is issued.
• The institution can charge a maintenance charge only 1 year after you activate the card, unless the card is a promotional card or one that can be reloaded and you gave express consent.
• It can charge overdraft charges only if you gave express consent; using the card does not count as consent.
• It can raise a charge or add a new one only if it has your name and a mailing or email address, which you can update, and discloses the change by sending a notice to the most recent address you gave at least 30 days before it takes effect and displaying a notice on its website for at least 60 days before it takes effect.

The KOHO Core entry above says who issues the KOHO prepaid card.

Vanilla prepaid cards

Vanilla’s fees, card amounts, issuer and balance checks aren’t covered here, because its site could not be read for this page; its own site is vanillaprepaid.com.

Reloadable cards, one-time cards and gift cards

FCAC separates prepaid cards from a financial institution that link to a payment network from promotional prepaid cards, and both from gift cards:

• FCAC says that with a prepaid card from a financial institution that links to a payment card network (American Express, Mastercard or Visa), you need to put money on the card, the money on the card won't expire, you usually won't have to pay for transactions you didn't make or approve, you can reload the card as many times as you want until it expires, you may be able to make cash withdrawals, and you may need to pay a fee to reload the card.
• FCAC says a prepaid card can come with a promotional, loyalty or award program, and that with a promotional prepaid card there's usually an expiry date, you can't reload it and you can't make cash withdrawals.
• FCAC says most gift cards don't expire, and that, depending on the rules in a province or territory, promotional or charitable gift cards and gift cards for a specific service may have an expiry date.

Prepaid cards for travel

The table’s last column gives each ranked card’s foreign transaction fee, and KOHO says its Extra and Everything plans don’t charge one. Holds at hotels and car rental agencies, which FCAC says may limit what can be spent, are in how a prepaid card works. Credit cards that charge no foreign transaction fee are on no foreign transaction fee cards.

Do prepaid cards build credit?

Wealthsimple says its prepaid card won’t help build credit, as the credit check line shows. KOHO’s Credit Building is a separate tool from its prepaid card, interest-free payments on a line of credit that KOHO says it reports to Equifax and TransUnion, as its entry shows. Cards that report to the credit bureaus are on secured credit cards, and how a history is built is on building credit.

Prepaid, secured or debit?

FCAC says a secured credit card needs a security deposit and may be an option with no credit history or with bad credit; secured cards are compared on secured credit cards. Neo says a secured card isn’t a prepaid card, since the security fund doesn’t pay the balance. Debit cards are covered on bank accounts, and the two kinds of card side by side on credit card vs debit card. Accounts for children and teens are on kids and teens bank accounts. The other pages in this group are listed on getting approved.

How this ranking works

Cards are listed when their provider describes them as prepaid cards and states a plan or card fee. They are ordered by yearly cost to hold: twelve times the monthly plan fee, at the yearly-plan price where KOHO offers one, or the yearly card fee. Cards with the same yearly cost share a place. Cash back is shown, not valued. KOHO’s cash back page says its cash back rates are subject to change at any time. How the table picks cards from this site’s card data, and prints a dash where no checked figure is held, is on best credit cards.