The downsides of using a prepaid card include limited merchant acceptance, especially with lesser-known providers, meaning they may not be accepted everywhere like credit or debit cards. Prepaid cards must be preloaded with funds, which can be inconvenient if unexpected expenses arise. Many prepaid cards have numerous fees such as activation, monthly maintenance, ATM withdrawals, and reloading fees, which can add up quickly. Additionally, prepaid cards do not help build credit since they do not report to credit bureaus. They also tend to offer limited rewards compared to credit cards and often have fewer features, such as fewer accounting tool integrations or restrictions on international use. Prepaid cards may also provide less consumer protection against fraud, and recovery of funds can be difficult if lost or stolen. These factors combined mean prepaid cards, while useful for budgeting and certain users, come with significant limitations and costs to consider.
