Can You Pay a Credit Card Bill With a Prepaid Card?

Prepaid cards have become a popular alternative to traditional debit and credit cards They provide the convenience of electronic payments without the risks of overdraft fees or debt But can these cards be used to pay off existing credit card balances? Here’s what you need to know,

How Prepaid Cards Work

Prepaid cards function similarly to debit cards. After putting money on the card, you can use it to buy things or pay for things up to the amount stored. When the balance runs out you simply add more funds.

The key difference from debit cards is prepaid cards are not linked to a bank account. The money you load onto a prepaid card is treated as a “deposit” instead of a withdrawal from your funds.

Prepaid cards also differ from credit cards. No line of credit is extended with a prepaid card. The card can only be used with the money that is loaded on it.

Major prepaid card providers include:

• GreenDot
• NetSpend
• American Express
• Visa
• Mastercard

Many prepaid cards now come with chip technology for enhanced security. You can use them to make purchases online, in stores, withdraw cash at ATMs, and in some cases, pay bills.

Can Prepaid Cards Make Credit Card Payments?

The short answer is no. It is not possible to pay off credit card balances with prepaid cards.

When you make a payment to a credit card issuer, it has to be processed as a credit transaction, deducted from an asset account like a bank account or other credit line.

Prepaid card balances are not considered assets. They work more like gift cards because the money is “spent” when you buy one and put money on it.

So while you can use a prepaid card for regular purchases, you cannot use it to make payments on a credit card or other lending accounts.

Attempting a Credit Card Payment

If you try to use a prepaid card to pay a credit card bill, the payment will simply be rejected. Most card issuers will not even allow you to attempt it.

For example, if you try to add a credit card as a “bill pay” on a NetSpend prepaid account, you’ll get the following error message:

“Credit card payments are considered cash advances and cannot be paid using your NetSpend® Prepaid Mastercard®. Please choose another payment method for credit card bill payments.”

The same is true if you try to submit a credit card payment through the bill pay portal of another prepaid brand like GreenDot or American Express.

Even if the payment did go through initially, the credit card company would likely reverse the transaction once they recognized it was made from a prepaid card.

So you cannot directly pay off credit card bills with prepaid card funds. But there are some alternative options, discussed next.

Workarounds for Paying Credit Cards

While you can’t pay a credit card bill directly with a prepaid debit card, there are a couple potential workarounds:

• Transfer funds to a bank account – Some prepaid cards allow you to transfer funds to an existing bank account. From there, you could make a credit card payment. Just be aware transfer fees often apply.

• Convert to money order – In some cases, you may be able to withdraw cash from a prepaid card, then use the cash to purchase a money order to mail as payment to the credit card company. This avoids digital detection of the prepaid source, but has fees and inconvenient logistics.

• Use virtual prepaid card – A few prepaid brands offer virtual accounts that can transact as credit without actually extending credit. If the virtual card is processed as a credit transaction, then the credit card issuer may accept it as a payment. But this only works sometimes, and virtual prepaid cards have very low limits.

• Pay off in cash – As a last resort, you could withdraw cash increments from the prepaid card to hand-deliver cash payments to your credit card company’s local branch. This is extremely inconvenient but technically possible.

As you can see, the options for paying credit cards with prepaid debit are very limited and impractical in most cases. It’s best to use traditional bank accounts, linked checking/debit cards, or cash to pay off credit card statements.

Why Prepaid Cards Are Limited

Prepaid card issuers restrict credit payments for a couple key reasons:

1. Prepaid balances are pre-funded – As noted earlier, prepaid card balances are not linked to any actual funds source or account. The money loaded onto the card has already been “spent” to purchase the prepaid value. So it cannot be tapped again as a funding source.

2. Risk of short payments – Allowing prepaid cards to make credit payments also creates risk that the payments would bounce if the balances are inadequate. This could leave credit card companies losing money.

3. Potential fraud – If prepaid cards permitted credit transactions, it could enable various fraud schemes. Issuers want to avoid this exposure.

4. Card processor rules – The major card networks like Visa and Mastercard prohibit prepaid cards from transacting as credit in most scenarios. Issuers must follow these regulations.

For all these reasons, prepaid card issuers universally decline attempts to pay credit card statements. The function is restricted at both the digital transaction and customer service levels.

When Prepaid Cards Work Best

Prepaid cards can be extremely useful for everyday spending on shopping, bills, meals, transportation, and other regular expenses. They provide valuable flexibility and control compared to cash.

Just recognize their limitations with credit payments or other lending accounts. Treat prepaid spending as a separate category from your credit obligations. Maintain a practical bank account or cash flow to handle credit commitments.

With this delineation, prepaid cards can be an excellent convenience and budgeting tool. Just don’t plan to use them for credit payments.

The Bottom Line

Attempting to pay a credit card bill with a prepaid debit card will be declined every time. The transaction systems are designed to prevent this incompatible function.

You need actual assets or credit sources, not just prepaid balances, to cover lending obligations like credit card statements. But for managing daily spending power, prepaid cards can be extremely handy. Just utilize them for their intended purposes.