Prepaid debit cards are similar to traditional cards linked to your checking account. However, they don't pull from your checking balance. Instead, you send money to the card issuer (creating a line of credit more or less) before using the card.
These cards are popular with people who don't use bank accounts -- either because they can't or don't want to. Perhaps they can't open bank accounts because of bad credit, or they may not have proper identification.
The cards offer convenience to the unbanked, but they are expensive. Consumers Union recently published a study on how prepaid debit card fees compare to bank fees (some people claim prepaid cards are a better deal), and it turns out that banks and credit unions are most likely cheaper than your prepaid card.
Even if you make no effort to minimize fees at the bank -- if you use foreign ATMs and fail to qualify for monthly fee waivers -- prepaid cards can still cost more. If you're careful about managing bank fees, things look even better.
[via Consumerist]