There is a multitude of prepaid credit card options here in Canada. However, one that sticks out in a lot of consumers' eyes due to its easy access in brick-and-mortar stores is the Vanilla prepaid Mastercard or Visa.
We're not massive fans of the Vanilla cards. Cashback cards like the CIBC Costco Mastercard are much better. However, we definitely realize they do have some use cases so we're going to put together a completely objective review. At the end of this review we'll highlight some alternatives you may want to choose if you think that the Vanilla prepaid Mastercard isn't for you. Let's get started.
An introduction to the Vanilla card series
The Vanilla card series is like any other prepaid credit card here in Canada. You can only spend money that is on the card. They are more of a debit card rather than a traditional credit card.
The key difference between the Vanilla cards and other prepaid cards is the fact that Vanilla cards are not reloadable. This means that you have to buy a particular denomination and once the card is done, it's done.
With the Visa, you can buy cards with as little as $25 on them up to as much as $250. The Vanilla Mastercard is a little smaller, only allowing $25-$200.
Where do I get my hands on a Vanilla Prepaid Visa or Mastercard?
You'll typically find these Vanilla cards at most major retailers. In fact, if you head to the gift card rack at say your local Walmart, it's highly likely they are a prominent card on the rack in both Canada and the United States.
However, this isn't the only place you can buy them. Vanilla cards are available online, likely in all of the denominations listed above.
Are Vanilla Visa and Mastercards safe?
The two cards are completely safe. In partnership with Mastercard, the cards are issued by Bancorp Bank, which has been providing companies with banking technology and products for over 2 decades. The company has a wide variety of product lines, including institutional banking, commercial lending, and real estate. The Visa card is in partnership with Visa, so no troubles here either.
Should I choose the Vanilla Mastercard or go with Visa?
Ultimately, it doesn't matter. There are virtually no differences between the two cards except for the fact you can go higher denominations with the Visa. If you're looking to buy one of these cards, it may be best to figure out where you're going to spend the money and see if the merchant accepts the card. For example, if your merchant doesn't accept Visa, buy the Mastercard.
How do the Vanilla prepaid cards work?
When you buy one of these cards, the store will activate it upon purchase. From there, all you need to do to use the card is sign the back and go. There is no need for a pin. If you're in the store, simply swipe the card. If you're online, just insert the card's details.
If the balance is not sufficient to cover the payment, you'll simply be asked to make up for the difference another way.
The main drawbacks of the Vanilla prepaid Visa and Mastercard
As mentioned at the start of the article, we're not huge fans of Vanilla prepaid cards here at Stocktrades. I will go over why before we get into some of the positives.
Vanilla prepaid card fees
This is by far the biggest dealbreaker when it comes to Vanilla prepaid cards. The cards charge excessive fees when compared to many other prepaid credit cards in Canada. If you buy the $250 Visa, you've essentially paid for a month of KOHO Premium, yet have gained none of the advantages.
Here are the costs you'll pay to initially activate your Vanilla prepaid card based on the different denominations:
Recurring payments are not available
The world is gravitating towards recurring subscriptions. We've witnessed many companies move from one-off product sales to recurring services. Think Microsoft Office for example. And for many people who cannot qualify for a credit card due to a lack of credit or poor credit, a popular choice is to use a prepaid credit card or potentially even a Visa debit card.
Unfortunately, you cannot use Vanilla prepaid cards for recurring payments.
Not only do the Vanilla prepaid cards charge you an activation fee, but they provide next to no additional benefits in their use. While many other prepaid credit cards offer rewards via cashback or discounts, the Vanilla cards offer nothing. A simple activation fee via a Vanilla card could almost cover a month worth of KOHO Premium, which enables you to gain up to 2% cash back on some purchases.
Foreign Exchange Fees
Unlike some cards, many of which we list near the bottom of this article, there is no way to waive the foreign exchange fees when you use your Vanilla card internationally. If you do, you'll be charged a 2.5% fee.
No ATM or point-of-sale cashback
Although this is a relatively minor inconvenience, you cannot get cash back from your Vanilla card at the till, and you cannot use the card at an ATM to get cash either. Once you've activated your card and the balance is on it, you must use the entirety of that balance via the card itself.
The benefits of the Vanilla prepaid cards
There are relatively few benefits to these cards when compared to other prepaid cards. However, we'll note some positives.
There is no expiry date
When you buy the card and activate it, the card is good forever. The funds will not expire, and you can use them at any time. If the actual card expires, simply get a hold of the card issuer and they'll get you a replacement with the funds on it.
It is the most convenient to purchase
Unlike other cards which require at minimum an application process and sometimes a credit check, in order to buy one of the Vanilla cards you simply walk into a store and buy it.
It can be used online unlike a debit card
If you have a traditional debit card, there is one small advantage with using the Vanilla card as a payment method, and that is the fact you can use it online at places like Amazon to buy things.
How do I know how much is on my Vanilla card?
In order to see the remaining balance on your card, simply head to the Vanilla prepaid website or contact them via toll-free phone. You'll have to provide your card information and they should let you know of the available balance remaining. Remember, the cards are not reloadable. So after it's empty, it's empty. If you do not have enough money to complete a purchase on the card, you will likely have to make multiple transactions to finish payment.
Overall, I really don't see much use to owning the Vanilla prepaid Mastercard or Visa
There are plenty of prepaid cards out there that allow you to not only fund them free of charge, but also collect rewards in doing so. I can see few use-cases for the Vanilla cards. In fact, the only time it would be worth it to utilize one of these is if you need the money immediately.
Because the other prepaid cards listed below take some time to apply for, the Vanilla cards truly do seem like a speed-related option, one that may be urgent enough to be worth paying a fee for. Otherwise, have a look at the alternatives below.
Alternatives to the Vanilla prepaid cards
KOHO Mastercard Prepaid Credit Card
Over my time of researching prepaid cards, I'm not sure I've come across one that's better than the KOHO Mastercard. Whether you're going the KOHO Premium route or basic route, the card has a plethora of benefits and unlike the Vanilla cards, virtually no downside.
Let's go over some of the pros of the basic version
- You can use it anywhere Mastercard is accepted
- Cashback feature of 0.5%
- Inactivity fee is easily avoided, just make a deposit or transaction every 6 months
- The funds deposited are held at a federally regulated bank
- There are no activation fees, and no monthly/annual fees
If you're looking to upgrade to KOHO Premium, here are the added benefits
- The card jumps to 2% cash back on transportation, grocery, and dining out costs
- The company waives all currency exchange fees
- Pricing protection on items purchased
- Higher card limits and balances
- Free financial coaching
- The small monthly fee of $9 is nullified with only $500 in monthly purchases at the 2% cashback level
At $9 a month, is it worth it to grab KOHO Premium? For that, you need to run the numbers yourself. But in this day and age, it's hard to imagine even a single person spending less than $500 a month on groceries, transportation, and dining, let alone an entire family.
In my opinion, the KOHO Prepaid card is the best prepaid card option for Canadians. However, if you're a traveller, you might just find added benefits in the next card.
Wealthsimple Cash card
Wealthsimple has gone from a company that was relatively unknown a couple of years ago to a giant in the Canadian economy. It now deals with investing through Wealthsimple Trade, Cryptocurrency in Wealthsimple Crypto, and also prepaid cards with its Wealthsimple Cash card.
The benefits of the Wealthsimple Card
- No annual fees
- You earn 1% back on all purchases
- Unlimited amount of e-transfers
- You can withdraw up to $1000 per day ($500 per transaction) at ATMs
With the card having no fees and 1% cashback, there really are no downsides to owning the Wealthsimple Cash card.
The Air Canada AC Conversion Prepaid Visa Card
If you spend time abroad, the AC Conversion Prepaid Visa Card may help you save a few bucks on currency conversion fees. You can sign up for one at a CIBC banking centre in the Pearson airport, or right online. You do not need a CIBC account to sign up, and because it is a prepaid card, there is no credit check.
The pros of the AC Prepaid Visa Card
- First ATM withdrawal of each month is free
- No fees
- 1% cash back on all purchases. CIBC states this will not be available after October 31st 2022
- Zero conversion fees when you make a purchase with foreign currency
- Can hold up to ten foreign currencies
The cons of the AC Prepaid Visa Card
- Replacement cards are $25
- Foreign currency withdrawals after your first free one can become ridiculously expensive
- 2.5% foreign currency charge on non-supported currencies
The STACK Prepaid Mastercard
There's relatively little downside to owning the STACK card. Although it doesn't offer the niche benefits of the AC card or just the overall package KOHO Premium does, it still could be a nice card for Canadians to own if they find its features useful.
The benefits of the STACK card
- Ability to store receipts
- Card supports major digital wallets like Apple Pay, Samsung Pay, Fitbit Pay, and Google Pay
- If you spend over $350 a month, foreign exchange fees are waived
- Over 140 merchants have added bonuses to holders of the STACK card
Benefits via the merchants can certainly change. So, make sure to check out STACK's website to grab the latest opportunities. The only downside I can think of with this card is the fact it doesn't build your credit. But, neither will any of the other cards on this list.
Most of these cards pale in comparison to traditional credit cards
If you can manage your spending, pay off the balance on time to avoid interest, make payments on time, and ultimately have a good credit rating there is little need to own a prepaid card like the Vanilla cards or even the others listed in this article. Traditional credit cards, at least the ones with rewards or a welcome bonus attached to them, carry larger benefits in most situations.
Not only do you build your credit as you pay them off, but if you manage to avoid paying interest on the card, the rewards are truly that, rewards. Over the years, I've received thousands of dollars in free flights, vacation packages, and hotels via my traditional credit card due to its reward system.