What is Netspend?

For a majority of American adults, it’s hard to imagine not having a bank account.

It’s how most of us get paid and otherwise conduct the business of day-to-day life: the quick grocery-store run when you realize you’re out of toilet paper, the swing by the drive-through to avoid having to actually make dinner.

However, for roughly 63 million unbanked or underbanked adults, navigating an increasingly cashless society without full access to banks can make even the most basic tasks difficult, if not impossible.

Prepaid cards offer unbanked individuals in particular, many of whom don’t trust banks or earn too little money to open an account, an alternative way to manage their money. Netspend is a provider of prepaid debit cards on the Visa and Mastercard networks — keep reading to learn more about how they work, their pros and cons and the fees you need to watch out for.

What is Netspend?

Founded in 1999, Netspend is a financial services company that specializes in reloadable prepaid debit cards for consumers who lack access to traditional banking or typically rely on “alternative financial services” such as check-cashing businesses or high-priced payday loans. Over the last 20-plus years, Netspend has grown to more than 5 million active accounts.

How does Netspend work?

Netspend’s prepaid cards function similarly to debit cards, but with one crucial difference: they’re not tied to an existing bank account. Otherwise, you can use a prepaid Netspend card as you would any other card: to make purchases, pay bills, cash checks, receive deposits and withdraw money from ATMs.

A Netspend card offers some of the same features as a traditional bank card, including on-the-go account management via mobile app, customizable text alerts, virtual account numbers to help protect against fraud and identity theft, zero liability and federal deposit insurance through the issuing bank. Netspend cards are issued by The Bancorp Bank, MetaBank and Republic Bank.

Replenishing your Netspend balance is easy thanks to a variety of loading options (more on that below). In addition, Netspend cards are compatible with PayPal and Western Union, allowing you to send money to friends and family and transfer funds between accounts as needed.

Who can qualify for a Netspend card?

Netspend doesn’t require a bank account or run a credit check, so pretty much anyone can qualify for a Netspend card. You’ll have to verify your identity by providing your name, date of birth, address and a government ID number, like the one on your passport or Social Security card, to have full use of the Netspend card, otherwise you can only make in-store transactions.

Primary cardholders need to be at least 18 years old, but Vermont citizens need not apply, as residents of the Green Mountain State are ineligible for a Netspend account.

How to sign up

Signing up for a prepaid Netspend card is fast and easy. To get started, fill out the online order form with the requested information. You’ll be asked to review the fees associated with the card, the cardholder agreement and Netspend’s privacy policy, as well as select the direct deposit options you’re interested in.

You’ll then choose a card design from among four options. You can customize your card with an image of your choice, but a $4.95 fee applies.

When you receive your Netspend card (about seven to 10 business days later, unless you pay for expedited delivery), follow the activation and identity-verification instructions that come with it. This includes choosing a PIN for ATM withdrawals and point-of-sale purchases.

After Netspend confirms your identity, you can add funds and start using your card right away.

How to use your Netspend card

As with all prepaid cards, your Netspend account’s purchasing power is limited to the amount of money that’s available for spending at any given time. You need to reload the card regularly to avoid transaction declines, especially if Netspend is your primary money management tool.

How to load and reload funds

One of the biggest benefits of a Netspend card is getting paid up to two days faster than a paper check through direct deposit. Unlike typical banks, Netspend makes payroll funds available upon receipt of payment instruction instead of posting funds at settlement.

Direct deposits aren’t limited to work paychecks, either: Social Security income, pension payments, unemployment benefits and tax refunds qualify for direct deposit too. You can also add funds to your account via mobile check load or visit one of Netspend’s 130,000-plus reload locations to deposit cash or a paper check.

What is the monthly fee for Netspend?

While you’re automatically enrolled in Netspend’s pay-as-you-go plan when you first sign up, you can switch to the monthly plan at any time over the phone or in the online account center. Here’s what each plan entails:

Which fee plan works best depends on the cardholder, but in general, the monthly option is probably the more cost-effective choice if you’re swiping your Netspend card more than once a week. After that, the $2 per-purchase fees in the pay-as-you-go plan will exceed the cost of the flat-rate plan, which comes with unlimited transactions for $9.95 per month.

Unfortunately, neither plan is inclusive of all the fees you could encounter while using your card. You’ll pay a fee for things like expedited mobile check load (the greater of 2 percent or $5 for government and payroll checks), over-the-counter withdrawals (the greater of 1 percent or $2.95), over-the-counter withdrawals at Netspend reload locations (the greater of 2.75 percent or $4), replacement card ($9.95) and ATM or ACH transaction declines ($1).

Some fees can be limited or avoided entirely. For instance, always use the lowest-cost reload location you can find. However, it’s easy to see how quickly those extra charges can add up, further illustrating the financial challenges for unbanked or underbanked individuals. After all, most people in these groups already earn low incomes.

Pros and cons of Netspend cards

While a prepaid Netspend card offers some of the same benefits as a traditional debit card — though not for free — potentially high fees based on normal account activity could make it prohibitively expensive. Here are some other pros and cons of using the service:

Pros

• No minimum balance requirements
• No late fees, overdraft fees or interest charges
• Opportunity to upgrade to Netspend Premier (save almost 50 percent on monthly fees, earn cash back with Payback Rewards and get a custom card for free)
• Optional savings account with a 5 percent APY for balances under $1,000
• Optional pharmacy savings card (save up to 50 percent on prescription medication)
• $20 refer-a-friend bonus

Cons

• Not a credit-building product
• $5.95 monthly inactivity fee after 90 days of no transactions, withdrawals or deposits
• Excessive fees for day-to-day card usage
• No free ATM access
• No purchase cushion for non-Premier cardholders

Bottom line

If you’re concerned about your privacy or you lack access to traditional banking services, a Netspend Visa or Mastercard might be a money-management tool worth considering. And with a bit of advance planning, you could minimize those pesky fees to make it a more cost-effective option.

That said, if you’d rather not worry about getting nickel-and-dimed every time you swipe, look for a bank or credit union that offers second-chance accounts, which typically include both a free debit card and free paper checks.