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Budget, save, even Win Money With Today's Prepaid Debit Cards
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Save, budget, and 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 banking writer for NerdWallet. He has been writing about personal finance since 2013 with a focus on certificates of deposit as well as other banking-related topics. His work has been featured by The Washington Post, USA Today, The Associated Press and the Los Angeles Times, among other publications. He is located in Berkeley, California.
Updated on Sep 19, 2017.
Written by Amy Hubbard Amy is a former editor in the banking industry and copy editor for NerdWallet. She was previously an editor and writer in and editor for the Los Angeles Times, the L.A. Daily News and the Hollywood Reporter, among other publications.
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In 1999 in 1999, businessman Steve Streit created the first merchant-sold prepaid debit card eventually known as Green Dot, as a way for teens to purchase online items.
The way we use prepaid cards has changed to the point that they go beyond helping people to spend, but also assist in the opposite way: budgeting and saving money. With budgeting options that can be customized, or creative incentives that help make money more efficient, prepaid debit cards enable you to make smart banking decisions, and without having to use a banks.
>> If you're ready to look at different cards, take a look at our list of .
Here's how prepaid debit cards could aid you:
Get your budget under control
Prepaid debit cards feature a card network logo such as Visa or Mastercard are accepted at retailers almost everywhere, and can be loaded with funds frequently. Most don't require a credit check. However, they're not suitable intended for anyone. They are primarily for those who want a fresh way to budget or need an alternative to an account with a checking.
A big advantage to most prepay cards is the absence of overdraft programs and their associated fees typically found on checking accounts. A balance on a card is a natural spending limit -- a card typically gets declined, with no fee, when there isn't enough for the purchase or payment.
Additionally the fact that more prepaid debit cards have tools for creating goals or budgets than previously. A majority of the prepaid card market tested had these tools in 2016, compared with 30 percent in 2014, according to . The samples comprised 18 cards in 2014 and 22 in 2016. Each sample was a representation of 90 percent or more of prepaid debit card market.
Like bank accounts, many prepaid debit cards give you mobile and online access to your accounts , using features like mobile money transfer and check deposit. But the more in-depth budgeting tools on some cards let you:
Customize your spending limits. You can make budgets using spending categories such as clothes and entertainment.
Visualize your purchase history. Some cards show pie charts or other graphics which categorize your expenditure.
Set up email and text alerts so that you are notified when you spend over a certain amount.
Utilize sub-accounts to handle different household costs. By securing one of your card's sub-accounts for a particular kind of expense, like groceries, can make it easier to put an amount limit on the expenditure.
Bluebird by American Express and Akimbo are two cards that allow for five to six sub-accounts which are connected to a master account but have separate account balances and physical cards.
These can work like the modern envelope system. Use one card to shop for groceries one for dining out another for travel, and so on.
If you have kids accounts, sub-accounts could grant them spending privileges , with the amount per card you set.
Beef up your savings (and perhaps win some money)
Budgeting is a healthy way to manage money, but you might need an incentive to stick with it.
"Budgeting for the sake of it isn't really effective," says Thea Garon who is the senior manager of the Center for Financial Services Innovation. With debit cards that are prepaid, she adds, it's best "when the experience of budgeting is linked to savings experience and aspirational goals."
The Walmart MoneyCard, issued from Green Dot Bank, has budgeting features such as alerts for your account, but it is distinguished by its linked savings program that is prize-linked. Last August, Wal-Mart and Green Dot added a monthly sweepstakes on its "vault." This vault works like savings accounts in that you can't spend funds from the balance, without moving it to the card's spending balance.
Saving money in the vault offers you the chance of winning prizes every month one dollar of savings equals one sweepstakes entry, and you can have as many as 500 entry. Every month you can win 499 prizes that receive $25, and one winner who receives the prize, $1,000.
"Especially in a low-interest market where you can win some money [is] captivating," says Mark Matthews, senior director of Walmart Services.
The real prize isn't in the sweepstakesit's the motivation to save more money, and it's effective. The average savings account balance was up by more than 35%, from $413 to $572 between August through December. According to Walmart, about 175,000 people were enrolled at the time of June. use on this 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 for building up an amount of money over time for emergency situations," he adds. Matthews pointed out that all savings have been manually added since there's the inability to automate savings transfers on the MoneyCard.
Prepaid cards have seen a surge in popularity, but ...
In terms of a bank option, and with more recent added features, prepaid cards have seen a surge in popularity since Streit's original 1999 design. The amount of transactions made for prepaid debit cards grew by 34% from 2009 to 2012, and by 5.6% from 2012 to 2015, according to research conducted by the Federal Reserve Payments Study in the year 2016. Even though growth has been slowing recently however, these cards have a place in the pockets of millions Americans' pockets.
The cards are safe to use and getting more secure: NerdWallet recently looked at 44 cards from the entire industry, including the major issuers and startups and found all cards were insured. The prepaid cards are expected to go into effect in April of 2018.
However, this doesn't mean that you should always use prepaid debit cards as the best option. Here are a few reasons they may not be the right choice for you:
The cards do not create credit. If you're looking to build your credit, check out a .
It's not the cheapest method to budget. A lot of cards charge monthly charges -- the average from a NerdWallet analysis was $4.67. You can see a few of the below.
Certain bank accounts offer better rewards to help save. Some savings accounts on the internet have rates of interest in excess of one percent per year. There are new banks such as Chime that offer rewards for saving. The debit card transactions are adjusted up to nearest dollars, and then those cents are automatically transferred to an account for savings. After every week, you'll get a bonus of 10% on all the cents that have been rounded, up to $500 in a year.
Explore alternatives and compare rates of interest.
The author's bio: Spencer Tierney is a writer and NerdWallet's authority on certificates of deposit. He has had his work featured on USA Today and the Los Angeles Times.
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