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Budget, Save, Even Earn Money with today’s prepaid Debit Cards
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Budget, Save, Even Make Money With Today’s Prepaid Debit Cards
By Spencer Tierney Senior Writer | Certificates of deposit and ethical banking, as well as banking deposits Spencer Tierney is a consumer banking writer at NerdWallet. He has written about personal finance since 2013, with a focus on certificates of deposit as well as other banking-related topics. His work has been highlighted on The Washington Post, USA Today, The Associated Press and the Los Angeles Times, among other publications. The location of his work is Berkeley, California.
Sep 19, 2017
Editor: Amy Hubbard Amy is a former editor in the banking industry and copy editor for NerdWallet. She was previously 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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Back in 1999 in 1999, an entrepreneur Steve Streit created the first merchant-exclusive prepaid debit card later dubbed Green Dot as an opportunity for teenagers to purchase online items.
Prepaid cards have changed over time, and today they don’t just help people spend to assisting them in doing the opposite: savings and budgeting. With budgeting options that can be customized, or creative incentives that help make money more efficient, prepaid debit cards make it possible to make smart banking decisions, and without the bank.
If you’re eager to compare cards, see our list of .
Here’s how prepaid debit cards could help you:
Get your budget under control
Prepaid debit cards feature an image of the card network, such as Visa or Mastercard and can be used at stores almost 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 those who want a fresh way to budget or a replacement for an account with a checking.
One of the major advantages of prepaid cards is the lack of overdraft services and the associated fees traditionally 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.
In addition there is a significant increase in the number of prepaid debit cards that have tools for creating goals or budgets than previously. About 54% of the prepaid market that was tested had these tools 2016, as compared to just 30 percent in 2014, according to . The sample included the cards of 18 in 2014 as well as 22 cards in 2016, and each sample represented 90 percent or more of debit card market that is prepaid.
Similar to bank accounts, a lot of prepaid debit cards give you online and mobile access to your account via options like mobile check deposit and money transfers. But the more in-depth tools for budgeting on some cards let you:
Set your own spending limits. Budgets can be created with spending categories, like clothing and entertainment.
Visualize the history of your purchases. Some cards display pie charts or other graphics that categorize your spending.
Create text and email alerts to be notified whenever you spend over a certain amount.
Utilize sub-accounts to handle 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 easier to put a cap on that spending.
Bluebird issued by American Express and Akimbo are two cards that offer up to five sub-accounts that are connected to a master account but with separate balances for each account and physical cards.
They can function as a modern-day envelope system. One card can be used for grocery shopping and another for dining out another for travel and so on.
If you have kids Sub-accounts may grant them spending privileges with a specific amount of money per card that you determine.
Save money (and maybe win money)
Budgeting is a healthy way to manage money, but you might require a motivation to continue it.
“Budgeting just for the sake of budgeting isn’t very effective,” says Thea Garon director at the Center for Financial Services Innovation. With debit cards that are prepaid Garon adds that it’s best “when the experience of budgeting is tied to the saving experience as well as the goals of your dreams.”
The Walmart MoneyCard that is offered by Green Dot Bank, has options for budgeting, including account alerts, however it stands out due to its prize-linked savings program. In August of last year, Wal-Mart and Green Dot added a monthly sweepstakes for the card’s “vault.” This vault is similar to an account for savings in that you can’t spend money from that balance, without moving it to the balance of your card’s spending.
The vault you save money in offers you the chance of winning prizes every month one dollar of savings equals one entry in a sweepstakes, and you can win as many as 500 entry. Each month you can win 499 prizes that receive $25, and one winner who receives the prize of $1,000.
“Especially in an environment with low interest where you can win some money [is] captivating,” says Mark Matthews, senior director of Walmart Services.
The real prize isn’t in the sweepstakes- it’s the incentive to save more and it’s working. The savings account’s average balance rose over 35% from $413 to $572 from last August to December. According to Walmart, about 175,000 people were enrolled in June. use of the Savings Vault on the MoneyCard has increased by 233% over one year ago.
“The objective here is to provide a meaningful mechanism and incentive to build an account over time, to be able to deal with emergency situations,” he adds. Matthews said that all savings have been manually added, since there’s the inability to automate savings transfers available on the MoneyCard.
Prepaid cards have exploded in popularity, but …
For banking options, and with more recent enhanced features, prepaid debit cards have gained popularity since Streit’s original 1999 design. The number of transactions for prepaid debit cards grew by almost 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, the cards hold a place in thousands of Americans’ pockets.
The cards are secure and are getting safer. NerdWallet recently analyzed 44 cards from the industry that included major issuers as well as newcomers and found all cards were protected. Prepaid cards will take effect in April of 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 the right choice for you:
They don’t help create credit. If you want to improve your credit score, you should consider one of these .
It’s not the cheapest method to budget. There are many cards that charge monthly fees — the average from a NerdWallet analysis was $4.67. You can see a few of the below.
Certain bank accounts offer better incentives to save. Some online savings accounts have interest rates that are higher than 1% annual percentage yield. There are even new banks such as Chime which offer rewards for saving. All debit card purchases are round by the closest dollar, and the cents go into an account for savings. When you finish each week, you earn a 10% bonus on the total amount of cents rounded up, at least $500 per year.
Compare interest rates.
About the author: Spencer Tierney is an expert on deposits and certificates at NerdWallet. He has had his work featured by USA Today and the Los Angeles Times.
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