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Budget, Save, Even Win Money With Today's Prepaid Debit Cards
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Save, budget, even Earn Money With Today's Prepaid Debit Cards
by Spencer Tierney Senior Writer | Certificates of Deposit ethics, ethical banking, bank deposits Spencer Tierney is a consumer banking writer for NerdWallet. He has covered the personal financial sector since with a focus on certificate of deposit and other banking-related subjects. His work has been covered in The Washington Post, USA Today, The Associated Press and the Los Angeles Times, among other publications. The location of his work is Berkeley, California.
Updated Sep 19, 2017
Written by Amy Hubbard Amy is a former banking editor and copy editor at NerdWallet. She previously worked as 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, an entrepreneur Steve Streit created the first retailer-sold prepaid debit card, eventually known as Green Dot to provide an option for young people to buy things online.
Prepaid cards have changed over time to the point that they go beyond helping people spend to assisting them in the opposite way: 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 bank smart, without having to use a banks.
If you're eager to evaluate cards, check out our selection of .
Here's how debit cards that are prepaid can assist you:
Get your budget under control
Prepaid debit cards feature an image of the card network, such as Visa or Mastercard are accepted at retailers almost everywhere, and can be loaded with money regularly. Most don't require a credit check. However, they're not suitable for everyone. They are primarily for people who are looking for a new approach to budgeting or the replacement of an account with a checking.
A big advantage to most card types is the absence of overdraft services and their associated fees typically found on checking accounts. A card balance is a natural spending limit -- a card will typically be declined without a fee, if it's not enough to cover an order or payment.
Additionally the fact that more prepaid debit cards include tools for setting goals or budgets than prior. About 54% of the market for prepaid cards tested had these tools in 2016, compared with 30 percent in 2014, according to . The sample 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.
Like bank accounts, many prepaid debit cards give you mobile and online access to your account, with features like mobile money transfer and check deposit. However, the more extensive tools for budgeting on certain cards allow you to:
Set your own spending limits. You can create budgets with spending categories like clothes and entertainment.
Visualize your history of purchases. Some cards show pie charts, or other graphic images that categorize your spending.
Set up email and text alerts so that you are notified when you spend more than a specific amount.
Utilize sub-accounts to handle various household expenses. By securing one of your card's sub-accounts for one kind of expenditure, such as groceries, can make it simpler to set the spending limit.
Bluebird issued by American Express and Akimbo are two cards that allow for five to six sub-accounts which are connected to a master account however, they have their own balances and physical cards.
These can work like a modern-day envelope system. One card can be used for grocery shopping, another for dining and a fourth for holidays, and so on.
If you have kids accounts, sub-accounts could grant them to spend with the amount per card you set.
Beef up your savings (and possibly win cash)
Budgeting is a healthy method of managing money However, you may require an incentive to keep it up.
"Budgeting for the sake of budgeting doesn't really work," says Thea Garon, senior manager at the Center for Financial Services Innovation. With prepaid debit cards Garon adds that it's better "when the budgeting experience is tied to the financial experience, as well as aspirational objectives."
The Walmart MoneyCard, issued by Green Dot Bank, has the ability to budget, such as account alerts, however it is distinguished by its linked savings program that is prize-linked. In August, Wal-Mart as well as Green Dot added a monthly sweepstakes on the card's "vault." This vault is similar to savings accounts in that you can't spend money from that balance, without moving it to the balance of your card's spending.
Saving money in the vault can give you the chance to win prizes every month: One dollar saved equals one entry in a sweepstakes which means you could win as many as 500 entry. Each month, the winners are 4,99 who are awarded $25 and one who wins the jackpot of $1,000.
"Especially in a low-interest environment where you can win just a bit of cash [is] captivating," says Mark Matthews the senior director of Walmart Services.
But the real winning isn't from the sweepstakes -it's the incentive to save more and it's effective. The average balance of savings accounts increased by 35% from $413 to $572 from August through December. According to Walmart, about 175,000 people were registered as of June, and usage for this Savings Vault on the MoneyCard has increased by 233% over one year ago.
"The objective here is to create a meaningful mechanism and incentive to build up an account over time in order to deal with emergencies," he adds. Matthews noted that all savings are manually added, since there's no automatic savings transfer feature on the MoneyCard.
Prepaid cards have exploded in popularity, however ...
For banking options as well as with more modern additions, prepaid cards have grown in popularity since Streit's 1999 inspiration. The number of transactions on prepaid debit cards increased by 34% from 2009 to 2012, and by 5.6% from 2012 to 2015, based on research conducted by the Federal Reserve Payments Study in 2016. While growth has slowed in recent months but the cards still hold a place in the pockets of millions Americans' purses.
They are also safe to use and getting more secure: NerdWallet recently analyzed 44 cards from across the market, including major issuers and startups, and found all the cards were secured. The prepaid cards are expected to take effect in April 2018.
But that doesn't mean you should always use prepaid debit cards as the best option. Here are a few possible reasons they might not be right for you:
These cards don't build credit. If you're looking to build your credit, check out a .
It's not the best method of budgeting. There are many cards that charge monthly charges. The average from the NerdWallet analysis was $4.67. You can see a few of the below.
Certain accounts at banks offer greater incentives to save. Some online savings accounts have rates of interest in excess of one percent per year. There are also new banks like Chime that offer rewards for saving. Your debit card purchases get rounded up to nearest dollars, and the cents go into the savings account. After each week, you'll earn a 10% bonus on all the cents that have been rounded that you earn, up to $500 in a year.
Explore alternatives and compare interest rates
About the author: Spencer Tierney is a writer, and NerdWallet's expert on deposit certificates. The work of Spencer Tierney has been highlighted on USA Today and the Los Angeles Times.
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