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Budget, save, even Make Money with today's prepaid Debit Cards
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Budget, Save, Even Earn Money With today's prepaid debit Cards
by Spencer Tierney Senior Writer | Certificates of deposit, ethical banking, banking deposits Spencer Tierney is a consumer banker at NerdWallet. He has covered personal finance since 2013 with a particular focus on certificates of deposit as well as other banking-related issues. The work he has written for him was highlighted on The Washington Post, USA Today, The Associated Press and the Los Angeles Times, among other publications. He is based in Berkeley, California.
Updated on Sep 19, 2017.
Editor: Amy Hubbard Amy is a former editor in the banking industry and copy editor at NerdWallet. She has previously worked as an editor and writer at the Los Angeles Times, the L.A. Daily News and the Hollywood Reporter, among other publications.
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Back in 1999, an entrepreneur Steve Streit created the first retailer-sold prepaid debit card, eventually referred to as Green Dot, as a way for teens to purchase online items.
Prepaid cards have evolved to the point that they don't just help consumers spend more money to assist them in doing the opposite budgeting and saving money. With features for budgeting that are customized or creative incentives that help make money more efficient Prepaid debit cards enable you to bank smart, without having to use a bank.
>> If you're ready to compare cards, see the list below of .
Here's how debit cards that are prepaid can help you:
Get your budget under control
Prepaid debit cards feature a card network logo like Visa or Mastercard and can be used at stores all over the world and are loaded with money regularly. Most don't require a credit check. However, they're not suitable ideal for anyone. They mainly benefit those looking for a new method of budgeting or an alternative to an account with a checking.
A big advantage to most prepaid cards is the lack of overdraft plans and the associated fees traditionally found on checking accounts. A balance on a card is a normal spending limit -- a card is typically declined with no fee, when it's not enough to cover the purchase or payment.
Additionally the fact that more prepaid debit cards include tools for setting budgets or goals than ever prior. Around 54% of the market for prepaid cards that was tested had these tools 2016 compared to 30 percent in 2014, according to . The sample included 19 cards from 2014, and 21 cards in 2016, and each sample represented 90 percent or more of prepaid debit card market.
Like bank accounts, many credit cards that are prepaid give you access online and via mobile to your accounts with features like mobile transfer of money and check deposit. However, the more comprehensive tools for budgeting on certain cards permit you to:
Customize your spending limits. You can create budgets with spending categories such as entertainment and clothing.
Visualize your history of purchases. Some cards have pie charts or other images that help you categorize your purchases.
Set up email and text alerts to be notified whenever you spend more than a certain amount.
Make use of sub-accounts for managing different household costs. By securing one of your card's sub-accounts to a specific kind of expense, like food, makes it easier to put the spending limit.
Bluebird from American Express and Akimbo are two cards that provide four to five sub-accounts, that are connected to a master accounts but have separate account balances and physical cards.
These can work like an envelope system of today. Use one card to shop for groceries and another for dining out, a third for vacations, and so on.
If you have kids Sub-accounts may grant them spending privileges with a set amount of money per card you set.
Beef up your savings (and possibly win cash)
Budgeting is an effective method of managing money However, you may require an incentive to continue it.
"Budgeting just for the sake of budgeting doesn't really work," says Thea Garon director at the Center for Financial Services Innovation. When it comes to debit cards with prepaid cards Garon says it's better "when the budgeting process is linked to savings experience and aspirational goals."
The Walmart MoneyCard is issued through Green Dot Bank, has budgeting features such as alerts for your account, but it stands out due to its savings program linked to prizes. In August, Wal-Mart as well as Green Dot added a monthly sweepstakes for its "vault." The vault is similar to savings accounts as you are unable to spend on that balance, without moving it to the card's spending balance.
The vault you save money in can give you the chance to win each month a prize: One dollar saved equals one entry in a sweepstakes, and you can have as many as 500 entry. Each month, the winners are 4,99 who are awarded $25 and one who receives the prize which is $1,000.
"Especially in an environment with low interest and the possibility of winning just a bit of cash [is] captivating," says Mark Matthews who is the director of senior management at Walmart Services.
But the prize really isn't from the prize -- it's the incentive to save more money, and it's working. The average balance of savings accounts rose over 35% between $413 and $572 during the end of August until December. According to Walmart estimates, 175,000 customers were registered at the time of June. usage of this Savings Vault on the MoneyCard has skyrocketed 233% over a year earlier.
"The purpose of this is to provide a meaningful mechanism and incentive for building up an account over time in order to deal with emergencies," he adds. Matthews pointed out that all savings have been manually added, since there's no automatic savings transfer feature on the MoneyCard.
Prepaid cards have seen a surge in popularity, however ...
In terms of a bank option, and with more recent additions, prepaid cards have seen a surge in popularity since Streit's inspiration in 1999. The amount of transactions made for prepaid debit cards grew by almost 34% from 2009 to 2012, and by 5.6 percent between 2012 and 2015, based on the Federal Reserve Payments Study in 2016. Even though growth has been slowing recently however, these cards have an important place in thousands of Americans' purses.
They are also secure to use, and they are becoming safer: NerdWallet recently looked at 44 cards from across the market, including major issuers and upstarts, and found all the cards are insured. The prepaid cards are expected to be available in April of 2018.
However, this doesn't mean that you should always use prepaid debit cards as the most suitable choice. Here are some reasons they may not be the right choice for you:
These cards don't make credit. If you're looking to boost your credit, check out a .
It's not the best method to budget. A lot of cards charge monthly fees -- the average from a NerdWallet analysis was $4.67. You can see a few of the below.
Certain bank accounts offer better incentive to invest in savings. Some savings accounts on the internet have rates of interest in excess of one percent per year. There are even new banks such as Chime that reward you for saving. The debit card transactions are adjusted to the nearest dollar, and those cents automatically go into the savings account. After every week, you'll get a bonus of 10% on all the cents that have been rounded, up to $500 in a year.
See alternatives and compare rates of interest.
About the author: Spencer Tierney is a writer, and NerdWallet's expert on deposit certificates. His work has been highlighted in USA Today and the Los Angeles Times.
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