Tips when buying prepaid credit and gift cards

A prepaid card is a convenient gift for that person on your list who has everything. But know what you're getting into—whether you're on the giving or receiving end — because these popular products don't all work the same way.

Each prepaid card has different terms and conditions. Take time to review your prepaid card agreement so that you're aware of any expiry dates, fees or limits. If you are buying the prepaid card as a gift, be sure to give the recipient the agreement information and the proof of purchase along with the card.

“Fees can lower the value of a prepaid card,” explains Lucie Tedesco, Commissioner of the Financial Consumer Agency of Canada. “To avoid surprises, always review the terms and conditions to find out what fees apply.”

Depending on the type of prepaid card, there may be fees to activate your card, make purchases, check your balance, withdraw money from a bank machine, load more money onto the card, or maintain your card if you don't use it for a certain period of time.

There are two main types of prepaid cards. Both require you to pay up front to load money and both are sometimes referred to as gift cards. Here's a breakdown of what you need to know about the different types of cards.

Prepaid cards issued by financial institutions. These link to payment card networks, such as American Express, Masterard and Visa. You can use the prepaid card at most merchants that accept credit cards from the same payment card network. The money on the card won't expire, but if the card itself expires, you may have to pay a fee to transfer any remaining funds to a new one. You can reload the card as many times as you want until it expires, but you may have to pay a fee to do this. You may also be able to make cash withdrawals and you usually won't have to pay for transactions you didn't make or approve.

Prepaid cards from retailers. These can only be used at a single store or group of stores. There's usually an expiry date, you can't reload them and you can't make cash withdrawals.

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