Receive your payday loan within minutes with a prepaid debit card.
Payday loans, as a product, are contentious. These loans appear in the media for the wrong reasons as often as they do for the right. While the potential problems – vulnerable customers lured into debt traps and sky-high rates and fees – may make for easy headlines, the potential positive benefits and innovations in the payday loans space are often ignored.
Payday lenders have introduced innovative loan applications and experimental software that enables them to have money transferred into borrowers’ accounts before conventional banks would have even started trawling through payslips to kick off the assessment process.
Another one of these solutions is a prepaid debit card where borrowers can receive their loans instantaneously.
How does a payday debit card work?
While the functions of these cards differ, most of them work in essentially the same way:
- You can receive the card after you apply for a short term loan. You apply for a payday loan with the lender, and if you’re approved you are either instantly sent a prepaid card or you elect to have one sent to you.
- You're able to receive repeat loans onto it. After the lender sends you your card you can receive instant loans from through it – "instant" meaning within a few minutes of approval. In this way, the card functions in a similar way to a credit card.
- You can spend with the card. You should be able to spend online, in-store and even overseas, although foreign transaction fees may apply.
- How you load funds. Most lenders also let you load your own funds onto the card to spend online, in store or to withdraw cash from ATMs.
- What the card costs. When you receive a loan onto the card you will be charged however much the loan costs – if it’s below $2,000 it will be 24% of the principal for a one-month loan. This is slightly higher than a typical credit card cash advance rate. Other fees to watch out for include ATM withdrawal fees, load fees and transaction fees.
What lenders are offering free payday debit cards?
When you’re approved for a Nimble loan, let the company know you also want a prepaid debit card. You will receive your card within 5 to 10 business days.
Here's what you can and can't do with the Nimble card:
- Receive approved loans from Nimble
- Load your own money via BPAY or through the direct credit ("Pay Anyone") facility
- Spend with your card anywhere prepaid Visa cards are accepted – online, in-store or overseas (subject to a 2.99% foreign transaction fee)
- Manage your spending through the online Member Area that offers feedback and graphs
- Make direct debit payments
- Spend more than $2,500 in-store in one day
- Withdraw more than $2,000 in one day from an ATM
- Spend more than $5,000 per day
- Load money for free (you'll be charged $1.99 for bank loads and $2.79 for BPAY)
You become eligible for a MoneyMe Express Visa Card when you are approved for a MoneyMe loan. To receive your card you will need to opt-in via the Member Area and verify your ID, be an Australian resident and have your contact details up to date. After you request your card it will be delivered by Australia Post and arrive within 7 to 10 business days.
This is what you can and cannot do with your card:
- Receive MoneyMe loans onto your card
- Top up your Visa card (after activation) with your own funds through Internet banking
- Pay for purchases online, in-store and over the phone anywhere prepaid Visa cards are accepted (this includes overseas for a foreign exchange fee of 2.99%)
- Check your balance and keep an eye on your transactions in the MoneyMe Member Area
- Receive free ATM withdrawals ($2 withdrawal from rediATMs and ATM operator fees for any other ATM)
- Receive free cash out in-store (you'll be charged $0.50 when getting cash out at point-of-sale)
- Let your card be inactive without being charge (a $5 monthly fee is charged after 6 months of inactivity)
- Withdraw more than $1,000 daily
- Spend more than $4,000 per day
You're able to get a Wallet Wizard card if you've previously finalised a Wallet Wizard, ClearCash or MoneyStarter loan. You might also be eligible if you're a current customer and making on-time repayments. You'll need to verify your ID, be an Australian resident and have up-to-date address details to receive a card. You can receive your card within 15 business days.
Here are the features and restrictions to be aware of:
- Receive instant Wallet Wizard loans onto the card
- Use the card online and in-store
- Manage your card and check your balance online
- Load your own funds onto the card (you can only access funds from a Wallet Wizard loan on the card)
- Withdraw money at an ATM for free ($2 withdrawal from rediATMs and ATM operator fees for any other ATM)
- Get cash out at a point-of-sale for free (you'll be charged $0.50)
- Have your card remain inactive without being charged (after six months of inactivity you'll be charged a monthly fee of $2.99)
- Spend more than $4,000 per day
- Withdraw more than $1,000 per day from ATMs
If you apply for a Cash Advance from SRG Finance, you are eligible to receive a Prepaid Visa Card. You may also eligible if you have applied for an SRG Finance Personal Loan and have been approved for $1,000 or less. When you take out either of these loans and let SRG Finance know you want a card, it will be issued to you via Australia Post. The card has several features, including:
- Use your card to receive SRG Finance Cash Advance Loans or Personal Loans up to $1,000
- Add your own funds to the card using the electronic funds transfer "Pay Anyone" function
- Withdraw funds and check your balance for free at Westpac or St.George ATMs
- Use your card in-store, online and overseas (subject to a 3.5% currency conversion charge)
- Manage your account online on the SRG Finance website
- Get cash out at point-of-sale
- Have funds direct debited from your card account
- Hold more than $1,000 on your card at any time
- Load money that would exceed the $1,000 card limit
360 Cash Loans
After you successfully repay your personal loan of between $150 and $4,000 with 360 Cash Loans, you will be issued a Financier Debit Card. This card gives you access to any subsequent loans you take out and is also attached to a personal bank account.
There isn't as much information provided by 360 Cash Loans for this card, but here are some of the things you can and can't do:
- Receive any further approved loans instantly on your card and access them via an ATM (urgent loans transferred into bank accounts attract fees, loans transferred into Financer Cards do not)
- Check your balance, transaction history and check/change your personal details
- Use your card anywhere prepaid Visa cards are accepted including online, in-store and over the phone
- BPAY and transfer your own funds onto the card
- Receive your card with your first loan (you must successfully repay a loan to be eligible for the card)
While Cash Converters doesn't yet have a prepaid card, the lending giant will do in the near future. It signed a partnership with Emerchants In mid-September 2015 that will allow it to offer prepaid cards to customers, who will be able to access their approved cash advances using it. The program is set to be implemented in November 2015.
Payday debit card comparison
Use the table below to compare fees, charges, load amounts and ATM fees.
|Max Amount YTD||$50,000.00||$50,000.00||$50,000.00|
|Max Daily Withdrawal||$2,500.00||$1,000.00||$4,000.00|
|Card Purchase Fee||$0.00||$0.00||$0.00|
|ATM Withdrawal Fee||$0.00||$0.00||$2.00|
|Foreign currency conversion fee||2.99%||3.50%||2.99%|
How do payday debit cards compare to bank prepaid cards?
Another alternative to prepaid payday cards is bank overdrafts with a debit card attached. These generally have a lower interest rate, usually around 16-20% p.a. rather than the 24% p.a. for a one-month payday loan under $2,000.
There are a few key differences with overdrafts that you should be aware of. The first is that they are a revolving line of credit, so there is no repayment date. While this can seem flexible and convenient compared to the short repayment terms on payday loans, remember that having no set term can encourage you to extend your repayments and see you paying more interest.
The interest on overdrafts is charged at an annual rate rather than a monthly rate, as is the case with payday loans, and you will only be charged interest when you start using the facility. Your overdraft will be attached to your transaction account.
So why not get an overdraft?
Overdrafts are an option for borrowers to consider, although the eligibility criteria aren't as lenient. Banks need to know you will be able to pay the overdraft back so your credit history, income and transaction history will be considered. Your options will be limited, because if you have bad credit or are on a lower income, banks will want you to have a history with them they can use to verify you, so you will need to apply with a bank you already have an account with.
Are payday debit cards the next "bad credit" credit cards?
While they aren’t exactly "credit cards" in the traditional sense, prepaid payday cards are an example of lenders moving forward in the bad credit financial space. Yes, the loans the borrowers receive on these cards are high-cost, but the cost of convenience has always been higher – the same is true of credit card cash advances.
Borrowers will continue to take out payday loans as long as they need money and as long as they have no other option. If they have a more convenient way to receive the money, and a way to continue to use this facility and load their own money onto it, then this could be a stepping stone for the rest of the financial industry to develop more innovative products for these borrowers.