Uber and Lyft have transformed the transportation market in recent years and no doubt taken a massive bite out of both the taxi and rental car market, which explains how they’ve been able to go public with IPOs and generate billions of dollars in revenue and market capitalization. When signing up for these services customers generally must enter a card-based payment method, which typically entails having a general use credit card issued by one of the four major payment networks (Visa, Mastercard, Discover or American Express). However, a significant portion of the population neither qualifies for or has a credit card and must rely on debit cards tied to checking accounts or prepaid debit cards to facilitate online or mobile-based electronic, non-cash payments.
This situation begs the question then, do prepaid debit cards work for ride-sharing services like Uber and Lyft? The short answer is maybe, depending on how much money is loaded to the card. This type of purchase is similar to buying gasoline at the pump, renting a car or reserving a hotel room in that the final amount of the transaction is not known until services are rendered. As such, card issuers grant merchants the ability to block out a certain amount of the credit line on a credit card (or a certain portion of the available balances on a prepaid debit card) to cover the average amount of a transaction. Then, once the actual amount of the transaction is determined and settled with payment any excess of the hold is released back to the customer’s account within a range of time, typically within 48 hours or two business days. This can cause issues in two ways. The first is that if the prepaid customer has adequate funds for the transaction but not for the total amount of the “hold” that is blocked out then the transaction won’t be authorized. The other issue involves the lag effect of the hold, which can artificially make the account seem more depleted than it is and reduce the customer’s ability to make other transactions during the hold period.
The Uber Debit Visa
Recently, Uber has come out with their own co-branded business debit card issued in conjunction with GoBank, an online-only bank. This card isn’t actually a prepaid debit card, though, but rather a traditional debit card tied to a checking account. When reading the product details it turns out that Uber is targeting their drivers with this card rather than the riding public. Apparently, it is designed to help facilitate payments to drivers more readily than other deposit methods and can serve as a mobile bank account. No doubt Uber has it structured to make a bit more money off its drivers in the process.
So, back to the issue of whether prepaid cards work for Uber and Lyft, the conditional answer is certainly yes if you maintain sufficient funds for a given destination on that card when hailing a ride. That’s probably not a huge amount of money at the end of the day – maybe $50 to $100 to be safe.
There are plenty of other payment methods that can be set up in Uber and Lyft apps – such as Apple Pay or Android Pay (which in turn is tied to a credit card in your smart phone’s payment wallet), PayPal or even potentially an Uber gift card (which can be purchased with a prepaid debit card online through Uber.com or Amazon.com or at offline stores like Walmart or Target.
Credit cards provide the most convenience and consumer protection but if you are averse to the temptations of spending more than you have and getting into debt or simply don’t have a credit score high enough to qualify for a credit card then a prepaid debit card can be a good option. And, as long as you diligently keep it loaded (perhaps through direct deposit in order to make it automatic) with adequate funds for expenses like ride sharing, it should work just fine.
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