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Save, budget, even Win Money With Today’s Prepaid Debit Cards
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Budget, Save, and even Make Money With Today’s Prepaid Debit Cards
Written by Spencer Tierney Senior Writer | Certificates of Deposit, ethical banking, banking deposits Spencer Tierney is a consumer banker at NerdWallet. He has written about the personal financial sector since, with a focus on certificates of deposit, as well as other banking subjects. The work he has written for him was highlighted by The Washington Post, USA Today, The Associated Press and the Los Angeles Times, among others. He is located in Berkeley, California.
Sep 19 September 19, 2017
Edited by Amy Hubbard Amy is a former banking editor and copy editor for NerdWallet. She previously worked as editor and writer in The Los Angeles Times, the L.A. Daily News and the Hollywood Reporter, among other publications.
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In 1999 the an entrepreneur Steve Streit created the first retailer-sold prepaid debit card, later dubbed Green Dot to provide an option for young people to shop online for items.
Prepaid cards have changed over time in the past, and now they don’t just help consumers spend more money to assist them in the opposite direction: budgeting and saving money. With customized budgeting features or innovative incentives to make money more efficient and save money, prepaid debit cards enable you to make smart banking decisions, and without the bank.
If you’re looking to evaluate cards, check out our list of .
Here’s how prepaid debit cards could aid 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 funds frequently. Most don’t require a credit check. However, they’re not suitable ideal for everyone. They are primarily for those who need a new approach to budget or need a replacement for an account with a checking.
A big advantage to most prepaid cards is the lack of overdraft services and the associated fees traditionally found on checking accounts. A card balance is a standard spending limit. A card will typically be declined without charge, if there’s not enough money to make the purchase or payment.
In addition, more prepaid debit cards include tools to help you set budgets or goals than they did before. A majority of the market for prepaid cards tested had these tools in 2016, as compared to just 30 percent in 2014, as per to . The sample included 18 cards in 2014 and 22 cards in 2016. Each sample was a representation of 90% or more of the debit card market that is prepaid.
Like bank accounts, many prepaid debit cards give you mobile and online access to your account with features like mobile check deposit and money transfer. But the more in-depth budgeting tools on some cards allow you to:
Set your own spending limits. You can make budgets using spending categories like clothing and entertainment.
Visualize the history of your purchases. Some cards display pie charts or other graphics that help you categorize your purchases.
Set up email and text alerts so that you are notified when you spend more than a certain amount.
Use sub-accounts to manage the different costs of household. The ability to designate one of your cards’ sub-accounts for one kind of expenditure, such as food, makes it simpler to set an amount limit on the expenditure.
Bluebird by American Express and Akimbo are two cards that provide up to five sub-accounts that are linked to a master accounts but have separate account balances and physical cards.
They can function as a modern-day envelope system. You can use one card for shopping at the grocery store one for dining out, a third for vacations and so on.
If you have kids Sub-accounts may grant them to spend with a specific amount of cash per card that you determine.
Beef up your savings (and possibly win money)
Budgeting is an effective way to manage finances, but you might require an incentive to stick to it.
“Budgeting for the sake of budgeting doesn’t really work,” says Thea Garon who is the senior manager of the Center for Financial Services Innovation. With debit cards that are prepaid Garon adds that it’s more effective “when the budgeting experience is linked to the financial experience, as well as aspirational objectives.”
The Walmart MoneyCard, issued from Green Dot Bank, has options for budgeting, including 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 its “vault.” This vault functions as an account for savings by preventing you from spending money from that balance without transferring it to the balance on the card’s spending.
The vault you save money in gives you chances to win each month a prize one dollar of savings equals one sweepstakes entry, and you can have more than 500 chances to win. Each month the winners are 4,99 that receive $25, and one winner who receives the prize which is $1,000.
“Especially in a low-interest environment, the chance to win a little bit of money is enticing,” says Mark Matthews who is the director of senior management at Walmart Services.
The real prize isn’t the sweepstakes itself — it’s the incentive to save more and it’s effective. 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 had participated as of June, and use of MoneyCard’s Savings Vault on the MoneyCard has skyrocketed 233% over one year ago.
“The goal here is to create a meaningful mechanism and an incentive to build up a reserve over time to handle emergency situations,” he adds. Matthews noted that all savings have been manually added since there’s the inability to automate savings transfers on the MoneyCard.
Prepaid cards have spiked in popularity, however …
For banking options and with the most recent enhanced features, prepaid debit cards have seen a surge in popularity since Streit’s 1999 inspiration. The number of transactions for prepaid debit cards grew by 34% from 2009 to 2012, and by 5.6% from 2012 to 2015, based on data from the Federal Reserve Payments Study in 2016. Although growth slowed recently but the cards still hold a place in millions of Americans’ purses.
The cards are secure to use, and they are becoming safer: NerdWallet recently looked at 44 cards from the industry which included major issuers and newcomers, and found all the cards were protected. The prepaid cards are expected to take effect in April of 2018.
However, this doesn’t mean that prepaid debit cards are always the best choice. Here are a few possible reasons they might not be suitable for you:
They don’t help create credit. If you’re looking to build your credit, check out a .
It’s not the cheapest way to budget. Many cards have monthly fees — the average from a NerdWallet analysis was $4.67. Check out some of the below.
Certain bank accounts offer better rewards to help save. Certain savings accounts online offer interest rates that are higher than 1% annual percentage yield. There are also new banks such as Chime which reward you by saving. The debit card transactions are rounded up to nearest dollars and then those cents are automatically transferred into the savings account. At the end of each week, you receive a 10% bonus on the total amount of cents rounded up which can be up to $500 in a year.
Compare interest rates.
Author bio Spencer Tierney is an expert on deposits and certificates at NerdWallet. He has had his work featured in USA Today and the Los Angeles Times.
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