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Budget, save, even Win Money With Today's Prepaid Debit Cards
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Budget, Save, Even Make Money With today's prepaid debit Cards
Written by Spencer Tierney Senior Writer | Certificates of deposit, ethical banking, banking deposit accounts Spencer Tierney is a consumer banking writer for NerdWallet. He has been writing about personal finance since 2013, with a particular focus on certificates of deposit, as well as other banking subjects. He has had his work featured by The Washington Post, USA Today, The Associated Press and the Los Angeles Times, among others. The location of his work is Berkeley, California.
Updated on Sep 19, 2017.
Editor: Amy Hubbard Amy is a former banking editor and copy editor at NerdWallet. She previously worked as an editor and writer for and editor for the Los Angeles Times, the L.A. Daily News and the Hollywood Reporter, among other publications.
Many or all of the products featured here are provided by our partners who pay us. This impacts the types of products we feature and where and how the product appears on a page. However, this doesn't influence our evaluations. Our opinions are our own. Here is a list of and .
In 1999, businessman Steve Streit created the first credit card that was sold by retailers, eventually referred to as Green Dot to provide an option for young people to buy things online.
Prepaid cards have evolved in the past, and now they go beyond helping people spend to assisting them in the opposite way budgeting and saving money. With budgeting options that can be customized, or innovative incentives to make money more efficient, prepaid debit cards allow you to manage your money smartly, without having to go through the banks.
If you're eager to look at different cards, take a look at the list below of .
Here's how prepaid debit cards could assist you:
Get your budget under control
Prepaid debit cards have an image of the card network, such as Visa or Mastercard, work at merchants nearly everywhere and can be loaded with funds frequently. Most don't require a credit check. However, they're not suitable intended for everyone. They mainly benefit people who are looking for a new way to budget or need a replacement for the checking account they have.
A big advantage to most prepay cards is the absence of overdraft services and their fees that are typically associated with checking accounts. The balance of a card is a standard spending limit. A card typically gets declined, without a fee, if it's not enough to cover the purchase or payment.
In addition the fact that more prepaid debit cards come with tools to set goals or budgets than prior. Around 54% of the prepaid market sampled had these tools in 2016, as compared to just 30% in 2014, according to . The samples included 19 cards from 2014, and 21 cards in 2016, and each sample was a representation of 90 percent or more of market for prepaid debit cards.
As bank accounts, many prepaid debit cards give you online and mobile access to your accounts with options like mobile transfer of money and check deposit. However, the more extensive budgeting tools on some cards let you:
You can customize your spending limit. You can create budgets with spending categories such as entertainment and clothing.
Visualize the history of your purchases. Some cards show pie charts or other images which categorize your expenditure.
Set up text and email alerts to be notified if you spend more than a certain amount.
Utilize sub-accounts to handle the different costs of household. The ability to designate one of your cards' sub-accounts to a specific type of expense, like grocery shopping, will make it simpler to set an amount limit on the expenditure.
Bluebird by American Express and Akimbo are two cards that allow for up to five sub-accounts which are connected to a master accounts however, they have their own balances and physical cards.
These can work like the modern envelope system. Use one card for shopping at the grocery store and another for dining out another for travel and so on.
If you have kids Sub-accounts may grant them spending privileges , with the amount per card, which you decide.
Save money (and perhaps win some money)
Budgeting is a healthy way to manage money, but you might need an incentive to stick with it.
"Budgeting just for the sake of it isn't really effective," says Thea Garon who is the senior manager of the Center for Financial Services Innovation. When it comes to debit cards with prepaid cards Garon says it's best "when the experience of budgeting is linked to the financial experience, as well as aspirational objectives."
The Walmart MoneyCard, issued from Green Dot Bank, has options for budgeting, including alerts for your account, but it stands out with its linked savings program that is prize-linked. Last August, Wal-Mart and Green Dot added a monthly sweepstakes for this card's "vault." This vault works like a savings account as you are unable to spend on that balance, without moving it to the balance of your card's spending.
The vault you save money in can give you the chance to win a prize monthly: One dollar saved equals one sweepstakes entry which means you could win as many as 500 entry. Every month the winners are 4,99 that receive $25, and one winner who wins the jackpot, $1,000.
"Especially in a low-interest market where you can win a little bit of money is exciting," 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 effective. The average savings account balance increased by 35% between $413 and $572 during last August to December. According to Walmart the number of people who were registered at the time of June. usage on MoneyCard's Savings Vault on the MoneyCard has increased by 233% over one year ago.
"The purpose of this is to provide a meaningful mechanism and incentive to build up an account over time in order to handle emergencies," he adds. Matthews noted that all savings were manually added, since there's the inability to automate savings transfers feature on the MoneyCard.
Prepaid cards have seen a surge in popularity, but ...
In terms of a bank option and with the most recent additions, prepaid cards have seen a surge in popularity since Streit's inspiration in 1999. The number of transactions for prepaid debit cards grew by 34% from 2009 to 2012, and by 5.6 percent from 2012 to 2015, as per data from the Federal Reserve Payments Study in 2016. While growth has slowed in recent months, the cards hold a place in thousands of Americans' pockets.
They are also secure and are getting safer: NerdWallet recently analyzed 44 cards across the entire industry, including the major issuers and startups, and found all the cards to be secured. The prepaid cards are expected to go into effect in April of 2018.
But that doesn't mean you should always use prepaid debit cards as the most suitable choice. Here are a few reasons they may not be the right choice for you:
These cards don't create credit. If you want to improve your credit score, you should consider a .
It's not the best method to budget. There are many cards that charge monthly fees -- the average of a study by NerdWallet was $4.67. You can see a few of the here.
Certain bank accounts offer better incentives to save. Some savings accounts on the internet have interest rates north of 1% annual percentage yield. There are also new banks such as Chime that offer rewards by saving. All debit card transactions are rounded to the nearest dollar and those cents automatically go to an account for savings. When you finish each week, you'll earn a 10% bonus on the total amount of cents rounded up which can be up to $500 per year.
See alternatives and compare rates of interest.
About the author: Spencer Tierney is a writer and NerdWallet's official authority on certificates of deposit. He has had his work featured by USA Today and the Los Angeles Times.
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