Prepaid Mastercard and Visa Credit Card Comparison Canada

Just the other day, I received a surprise gift in the mail – a $200 prepaid Vanilla Prepaid Mastercard.  There are not a lot of things that perk up my day more than receiving money in the mail, so as you can imagine, receiving a $200 shopping card was a pleasant way to start my day.

I’ve heard of these prepaid credit cards before, but I’ve never used one.  Upon examining the package, it clearly indicates that there is a $6.95 activation fee.  My first reaction was one of slight agitation as it eats into the balance (I dislike fees).  However, upon further investigation, I soon realized that it’s person who purchases the card that’s responsible for the activation fee when purchasing the gift.

Prepaid credit cards are a pretty smart revenue stream for credit card companies.  They get the initial activation fee for every card along with their regular 2% – 3% merchant fee for every transaction.  In addition, if the user doesn’t spend the money fast enough, they start charging a monthly fee.

The Upside

Not only is it great for credit card companies, it’s also great for the receiver of the gift.  They get to shop anywhere they like without being bound to a single store like the traditional gift card.  Some may suggest to simply give cash to avoid the activation fee, however, giving cash to a frugal person (like me) will just end up being saved or used for essential bills.  This way, the money can be spent as a gift without any guilt.

Using the card could not be simpler.  I would think a gift card like this would need to be activated somehow. With the Vanilla Mastercard however, the user simply swipes and signs, just like a regular credit card.

The Downside

If I were to look at the downside of prepaid credit cards, I would say that tracking the balance is a bit of an inconvenience.  Typically with specific store based gift cards, the balance is shown on the receipt.  Not so with prepaid credit cards which need to be tracked by the user.  The transaction will simply decline if the purchase price is greater than the card balance.  Fortunately, the Vanilla Mastercard has an online system to track purchases painlessly.

Another annoyance is the fee charged for inactivity.  For the Vanilla Mastercard prepaid credit card, they start charging $2.50/month at the 6 month mark after activation.

So, with Christmas around the corner, you may be considering a gift of a prepaid credit card (at least I am).  There are a few offerings for prepaid cards in Canada, which I have compared below.

Prepaid Credit Card Comparison

Vanilla Mastercard BMO RBC
Activation Fee $4.95/$50, $5.95/$100, $6.95/$200 $9.95 (valid for 3 years) $3.95
Monthly Fee $2.50 starting 7th month after activation $2.50 after 12 months inactivity $1.50 starting 7th month after activation
Online Access Yes Yes Yes
Anonymous Yes No No? (must be purchased in branch)
Reloadable No Yes No
Expiration 12 months from activation 3 years Yes (not indicated on website)
Cash Withdrawal No Yes No
Amount refunded after expiry: No Yes No
Extras None Extended Warranty/ Purchase Protection None
Vanilla Mastercard BMO RBC
Activation Fee: $4.95/$50, $5.95/$100, $6.95/$200 $9.95 (valid for 3 years) $3.95
Monthly Fee: $2.50 starting 7th month after activation $2.50 after 12 months inactivity $1.50 starting 7th month after activation
Online Access: Yes Yes Yes
Anonymous: Yes No No? (must be purchased in branch)
Reloadable: No Yes No
Expiration: 12 months from activation 3 years Yes (not indicated on website)
Cash Withdrawal: No Yes No
Amount refunded after expiry: No Yes No
Extras: None Extended Warranty/ Purchase Protection None

Final Thoughts

Judging from the table above, it seems that the BMO product is best if you were to purchase the card for personal use as it has a long expiry date along with extended warranty/purchase insurance .  However, as a gift the $9.95 charge is a bit high which makes it a toss up between the Vanilla Mastercard and RBC.

What are your thoughts on prepaid credit cards?  Would you buy them as a gift?

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FT is the founder and editor of Million Dollar Journey (est. 2006). Through various financial strategies outlined on this site, he grew his net worth from $200,000 in 2006 to $1,000,000 by 2014. You can read more about him here.
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7 years ago

Prepaid Visa Card is the worst card I have purchased. I could barely get any transactions to go through online and their phone support was complete a waste of time. Brutal.

The Mastercard I had last month worked on all the websites that I needed it to and when I needed help with one thing their support was great.

I regret purchasing the Visa. Worst mistake and now I’m stuck with a card I cant use

8 years ago

i got one of these for christmas, i loved it… enabled me to not only make purchases from ebay but open a paypal account without having to use my bank account

Noni Mausa
8 years ago

Hmm. I got a prepaid Mastercard at BMO a couple of winters ago, for safe net purchases and other small purchases. It worked well enough, but yesterday (7-January-2013) I got an email from the bank saying the cards are being discontinued as of the end of March, no reason given.

I found that over the time I owned the card, there were sites and businesses that wouldn’t accept the prepaid cards at all, though none of them explained why.

Adding insult to injury, this past year or two I have found that many businesses in the States would not accept my Canadian DEBIT card, unless it was backed by either Visa or MasterCard. What’s the use of having a debit card that pays out real money backed by my bank, if they still want a credit card company in for their slice? Do I have to travel with sacks of money now?

JoAnn Bentley
8 years ago

Appears to be a solution for avoiding expensive postage for gifts I send from US to Canada, which sometimes never arrive at the destination anyway.

10 years ago

Wait that comparison chart up there – BMO has a reloadable prepaid credit card if I read that right, right? If they do I need to go to them for it. Reloadable sounds nice otherwise prepaid cards in general I use a lot and they’re handy, even if I have to go through activation fee – paaain. But like Future Money-Bags said up there, there’s not a whole lot you have to worry about when carrying a prepaid card. And I think it’s good for young teenagers that wants to buy online products from Amazon and stuff.

Future Money-Bags
11 years ago

Not sure if anyone mentioned this, but if you have bad credit from past debt or perhaps a bankruptcy; these cards are great!
Can be used as a CC, and depending on where you get it, can be used on more online sites.

People with bad debt or bad credit, don’t want to be carrying around the only money they have. Having this mini credit card, that has no monthly interest on purchases; can be considered a nice change.

Just a thought.

cashback cards
11 years ago

These can make some really great gifts, but it’s suprising me how so many companies are already going to this. I signed up for a promote for a rebate on a item and I was thinking I would get check in the mail. But, no they came in as these prepaid credit cards with there actual brand on it. While at first my wife was alittle upset thinking and wanting to cash to just throw in the bank they turned out to be a great way to spend money on our latest vacation.

Great article and thanks for sharing all the great information like always!

11 years ago

What’s with the whole Prepaid CC vs Cash war?

Any ways.. Most prepaid CC would benefit teens ( like me) or young adult. Have a child travelling either for university or over seas? Just get them the BMO card put X amount of money on it and give it to them. Just write down the code on it and track their purchases so you know what their doing. If they ask for more money just relaod there card online but ONLY depending on how their managing it.

Prepaid credit cards give people the option of buying stuff online. It’s easy to add funds to paypal with them. Master Cards give people the option of buying stuff online and in stores , and cash limits people to in store trades ( though theres like money order and stuff those are less conveinent and not always as safe)

I would’t say one is better then the other ( cash or Pp.Cc) but they all have different advantages.

I’m 14 but looking on that chart I’m going to try and get a BMO card because it last the longest and is reloadable

Gates VP
11 years ago

Look, these things have a very limited scope, but they do have some uses.
The biggest positive if for the “under-18-no-credit-card” crowd.

However, these things are just rife with issues. They don’t always work on-line and the don’t work at some brick and mortar merchants. The expiry shouldn’t be an issue on most gifted cards, but the expiry rates border on usury.

I honestly like the idea of cash cards. The concept of moving money onto a card is a fundamentally sound idea (mobile phone money transfers are a fast growing business in parts of Africa). But the current rates are simply un-competitive with the existing state of affairs.

When almost everybody has a no-fee bank account and free check cashing, the check option seems like a no-brainer. Heck if you really feel like paying fees to transfer money, use a Money Order or a Cashier’s Check or a fricken MoneyGram :)

Of course, if they could drop these things to like sub-1% activation fees, I think they would actually see a rise in use. Of course, they won’t for now, b/c the competition doesn’t exist, but it won’t be long.

Susan Mladenovich, CMA
11 years ago

I got my 13 year old son a prepaid card through MuchMusic so that I don’t have to pay for the Itunes and Xbox purchases. Plus I can track his purchases and also he won’t lose the cash. My assistant got one through CAA for her son when he went to Italy on a school trip. Again, he couldn’t lose the cash and she could also put more money on the card if he needed it.