What is a prepaid card designed to do?

A prepaid card is fundamentally designed to facilitate purchases using funds that have been preloaded onto the card. Users can load a set amount of money onto the card, and the card can then be used to make purchases until that balance is completely depleted. This characteristic distinctly defines prepaid cards, making them a practical option for budgeting, as users cannot spend more than what is loaded, thereby avoiding debt.

While prepaid cards can allow for cash withdrawals at ATMs, their primary purpose is not to serve as a primary cash access tool but rather as a spending tool. They do not accumulate interest because they typically do not function as traditional savings or checking accounts. Additionally, they do not offer credit based on income since they do not involve borrowing money—the cardholder can only spend what they have previously deposited onto the card. Thus, the best description of a prepaid card is its function to allow purchases until the balance is exhausted.