How to Profit From Pre-paid Debit Cards

All three major credit card issuers, Visa, Mastercard, and American Express sell pre-paid debit cards. A pre-paid debit card allows you to purchase goods and services at any major retailer that accepts the card issuer. Some online only pre-paid debit cards will only be accepted at online merchants and most pre-paid debit cards cannot be used for cash like transactions. Pre-paid debit cards are sold in certain standard denomination for example, $100 and carry an activation fee that is typically $3.95 to $6.95. There are frequent sales where the retailer will waive the activation fee. This creates an opportunity where you can buy pre-paid debit cards and get points in the process, effectively buying a dollar for less than a dollar.

Profit

Your profit from buying a debit pre-paid card is shown in the equation below:

Pre-paid Debit Card Profit = Points generated – fees paid – normal points generated on spend

For example if you earn 5% back using Paypal on your Chase Freedom card and buy $1000 of pre-paid debits that have a $5.95 fee, then use the card to buy items at Target you would normally get 1% back on, your overall profit would be:

$50 (5% of $1k) – $5.95 – $10 (1% of $1k) = $34.05

How to get a discount on pre-paid debits

There are three primary ways to get a pre-paid debit card for less than its face value:

• Purchase the debit card in a store for which there is a category bonus.
  • Category bonuses give you a percentage back, usually 3-5% for a certain kind of store or service provider for example grocery stores, office supply stores etc.
  • Cards with great pre-paid debit category bonuses”
    • Chase Freedom – 5% back on purchases made with PayPal (must set the Chase Freedom card as the payment method on PayPal) in the month of December.
    • Chase Ink Cash  – 5% back on purchases made at office supply stores. Office Depot and Staples have frequent promotions where they waive the activation fee.
    • Citi Shop Your Way card – no longer takes applications, but has frequent offers that result in large discounts on purchases.
• Add an offer on your credit card for a retailer that sells pre-paid debit cards.
  • Credit cards have offers that give you a number of dollars or a percentage off a retailer/service provider. By activating an offer and buying a pre-paid debit card you can create a discount on the pre-paid debit card.
    • Many American Express cards currently have a buy $750 in Amex pre-paid debit cards and get $50 off or roughly a 6.7% discount and Amex is also running a sale where they wave the purchase fee with promo code EPIC25.
    • Chase and PayPal often have 5% offers on pre-paidcards.com
• Use a card where you are trying to meet the sign-up bonus.
  • If you have a card with a large spending requirement, buying pre-paid debits can be an easy way to meet your minimum spending requirement. The percentage you get on the sign-up bonus is likely to far exceed the fee you are paying on the pre-paid debits as long as you are buying in large ($250+) denominations.
  • There is one important caveat. American Express is very temperamental about doing this and will likely not count the spending towards your minimum required spending and may even claw back the points you earn from it.

How to spend pre-paid debits

Use a pre-paid debit card on any spend that you don’t normally earn more than 1 point per dollar on. Good candidates include utilities, insurance payments, some taxes (not all governments will accept them) and retailers such as Amazon where it is normally hard to get a discount. In some cases you can also stack discounts that a retailer is giving you with a pre-paid debit to get an even larger discount.