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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 deposit accounts Spencer Tierney is a consumer banker at NerdWallet. He has been writing about finances for individuals since the year 2013, with a particular focus on certificates of deposit, as well as other banking topics. He has had his work covered 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 September 19, 2017
Written by Amy Hubbard Amy is a former banking editor and copy editor for NerdWallet. She previously worked as an editor and writer for the Los Angeles Times, the L.A. Daily News and the Hollywood Reporter, among other publications.
A majority of the products featured here come from our partners who pay us. This influences which products we feature and where and how the product appears on a page. However, this doesn't influence our evaluations. Our opinions are entirely our own. Here's a list of and .
Back in 1999 the entrepreneur Steve Streit created the first merchant-sold prepaid debit card later dubbed Green Dot as an option for young people to buy things online.
Prepaid cards have changed over time, and today they go beyond helping people spend to assisting them in the opposite direction budgeting and saving money. With features for budgeting that are customized or innovative incentives to make money more efficient Prepaid debit cards allow you to make smart banking decisions, and without having to go through the bank.
If you're eager to look at different cards, take a look at the list below of .
Here's how debit cards that are prepaid can assist you:
Get your budget under control
Prepaid debit cards have the logo of the card network like Visa or Mastercard, work at merchants nearly everywhere and can be loaded with money regularly. Most don't require a credit check. But they're not for everyone. They mainly benefit people who are looking for a new approach to budgeting or the replacement of an account with a checking.
One of the major advantages of prepay cards is the absence of overdraft programs and their fees that are typically associated with checking accounts. The balance of a card is a natural spending limit. A card will typically be declined without charge, if there isn't enough for an order or payment.
In addition there is a significant increase in the number of prepaid debit cards that have tools for creating budgets or goals than they did before. Around 54% of the prepaid market that was tested had these tools 2016, compared with 30 percent in 2014, as per to . The sample included 18 cards in 2014 and 22 in 2016. Each sample represented 90% or more of the market for prepaid debit cards.
As bank accounts, many debit cards for prepaid use offer mobile and online access to your account, with options like mobile check deposit and money transfers. However, the more extensive budgeting tools available on some cards allow you to:
Set your own spending limits. Budgets can be created with spending categories such as clothes and entertainment.
Visualize your history of purchases. Some cards show pie charts or other graphics that help you categorize your purchases.
Set up text and email alerts to be notified whenever you spend more than a specific amount.
Utilize sub-accounts to handle the different costs of household. The ability to designate one of your cards' sub-accounts for a particular kind of expenditure, such as food, makes it simpler to set the spending limit.
Bluebird issued by American Express and Akimbo are two cards that provide five to six sub-accounts that are connected to a master accounts however, they have their own balances and physical cards.
These can work like an envelope system of today. One card can be used for shopping at the grocery store one for dining out and a fourth for holidays and so on.
If you have children, sub-accounts can allow them spending privileges , with an amount per card that you determine.
Beef up your savings (and possibly win cash)
Budgeting is a good way to manage money, but you might need 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, she adds, it's more effective "when the budgeting process is tied to the financial experience, as well as aspirational objectives."
The Walmart MoneyCard is issued through Green Dot Bank, has budgeting features such as account alerts, however it stands out due to its linked savings program that is prize-linked. Last August, Wal-Mart and Green Dot added a monthly sweepstakes to this card's "vault." This vault functions as an account for savings by preventing you from spending funds from the balance, without moving it to the card's spending balance.
Saving money in the vault can give you the chance to win prizes every month 1 dollar saved is one entry in a sweepstakes which means you could win up to 500 entries. Every month you can win 499 prizes who are awarded $25 and one who wins the jackpot, $1,000.
"Especially in a low-interest market, the chance to win a little bit of money [is] captivating," says Mark Matthews who is the director of senior management at Walmart Services.
But the real winning isn't from the sweepstakes -- it's the incentive to save more and it's working. The savings account's average balance was up by more than 35%, from $413 to $572 between August through December. According to Walmart the number of people who were registered as of June, and usage of this Savings Vault on the MoneyCard has risen 233% from the previous year.
"The goal here is to create a meaningful mechanism and incentive to accumulate a balance over time to handle emergency situations," he adds. Matthews pointed out that all savings were manually added since there's no automatic savings transfer on the MoneyCard.
Prepaid cards have spiked in popularity, however ...
As a banking alternative and with the most recent enhanced features, prepaid debit cards have grown in popularity since Streit's inspiration in 1999. The number of transactions using prepaid debit cards rose by almost 34% from 2009 to 2012, and by 5.6 percent from 2012 to 2015, based on research conducted by the Federal Reserve Payments Study in 2016. While growth has slowed in recent months, the cards hold a place in the pockets of millions Americans' pockets.
The cards are secure to use, and they are becoming more secure: NerdWallet recently looked at 44 cards across the market, including major issuers and startups and found all cards are protected. More on prepaid cards will go into effect in April 2018.
However, that doesn't mean that prepaid debit cards are always the best choice. Here are a few possible reasons they may not be suitable for you:
The cards do not build credit. If you want to improve your credit score, you should consider a .
It's not the cheapest method of budgeting. There are many cards that charge monthly charges. The average from the NerdWallet analysis was $4.67. Check out some of the below.
Some bank accounts have better incentive to invest in savings. Some online savings accounts have rates of interest in excess of 1percent annual percentage. There are new banks such as Chime which reward you for saving. Your debit card purchases get rounded up to nearest dollars and the cents go into an account for savings. When you finish each week, you'll earn a 10% bonus on all the rounded-up cents which can be up to $500 per year.
Explore alternatives and compare interest rates
Author bio Spencer Tierney is a writer, and NerdWallet's expert on certificates of deposit. The work of Spencer Tierney has been highlighted in USA Today and the Los Angeles Times.
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