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Save, budget, even Win Money With Today’s Prepaid Debit Cards
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Budget, save, even Win 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 writer for banking at NerdWallet. He has written about the personal financial sector since with a particular focus on certificates of deposit as well as other banking-related issues. He has had his work covered on The Washington Post, USA Today, The Associated Press and the Los Angeles Times, among others. He is based in Berkeley, California.
Sep 19 September 19, 2017
Written by Amy Hubbard Amy is a former bank editor and copy editor for NerdWallet. She was previously an editor and writer at 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 credit card that was sold by retailers, eventually dubbed Green Dot to provide a way for teens to buy things online.
The way we use prepaid cards has changed to the point that they are more than just helping consumers spend more money to assist them in spending less and budgeting. With customized budgeting features or innovative incentives to make money more efficient, prepaid debit cards make it possible to manage your money smartly, without the banks.
If you’re eager to evaluate cards, check out the list below of .
Here’s how prepaid debit cards could help you:
Get your budget under control
Prepaid debit cards feature a card network logo like 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 anyone. They are primarily for those who need a new approach to budget or need a replacement for the checking account they have.
A big advantage to most prepay cards is the absence of overdraft programs and their fees that are typically associated with checking accounts. A card balance is a standard spending limit. A card typically gets declined, without a fee, if there’s not enough money to make a purchase or payment.
Beyond that the fact that more prepaid debit cards include tools to help you set budgets or goals than ever previously. A majority of the market for prepaid cards sampled had these tools in 2016, as compared to just 30 percent in 2014, as per to . The samples comprised the cards of 18 in 2014 as well as 22 in 2016. Each sample represented 90% or more of the debit card market that is prepaid.
As bank accounts, many credit cards that are prepaid give you online and mobile access to your account with services including mobile check deposit and money transfers. But the more in-depth tools for budgeting on some cards permit you to:
Customize your spending limits. Budgets can be created with spending categories like clothing and entertainment.
Visualize your history of purchases. Some cards have pie charts, or other graphic images that categorize your spending.
Create text and email alerts to be notified if you spend more than a specific amount.
Utilize sub-accounts to handle different household costs. By securing one of your cards’ sub-accounts for a particular type of expense, like food, makes it easier to put an amount limit on the expenditure.
Bluebird by American Express and Akimbo are two cards that provide four to five sub-accounts, that are linked to a master accounts but have separate account balances and physical cards.
They could function like a modern-day envelope system. You can use one card to shop for groceries, another for dining and a fourth for holidays, and so on.
If you have kids Sub-accounts may grant them to use their credit card for spending with a specific amount of cash per card that you determine.
Beef up your savings (and possibly win cash)
Budgeting is a healthy method of managing money, but you might require a motivation to stick to it.
“Budgeting just for the sake of it isn’t going to 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 tied to savings experience and aspirational goals.”
The Walmart MoneyCard, issued from Green Dot Bank, has options for budgeting, including account alerts. However, it is distinguished by its prize-linked savings program. Last August, Wal-Mart and Green Dot added a monthly sweepstakes for the card’s “vault.” This vault is similar to an account for savings by preventing you from spending on that balance without transferring it to the balance on the card’s spending.
The vault you save money in offers you the chance of winning a prize monthly one dollar of savings equals one sweepstakes entry, and you can have more than 500 chances to win. Every month there are 499 winners who get $25 and one winner who receives the prize which is $1,000.
“Especially in an environment with low interest and the possibility of winning just a bit of cash [is] captivating,” says Mark Matthews the 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 average balance of savings accounts increased by 35% from $413 to $572 between August through December. According to Walmart, about 175,000 people had participated at the time of June. usage for MoneyCard’s Savings Vault on the MoneyCard has skyrocketed 233% over the previous year.
“The goal here is to provide a meaningful mechanism and incentive to build up a balance 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 available on the MoneyCard.
Prepaid cards have seen a surge in popularity, however …
In terms of a bank option, and with more recent enhanced features, prepaid debit cards have gained popularity since Streit’s 1999 inspiration. The number of payments on prepaid debit cards increased by nearly 34% between 2009 to 2012 and 5.6 percent between 2012 and 2015, based on research conducted by the Federal Reserve Payments Study in 2016. Although growth slowed recently, the cards hold the place of thousands of Americans’ pockets.
The cards are also relatively secure and are getting safer: NerdWallet recently analyzed 44 cards across the industry that included major issuers as well as newcomers and found all cards are insured. More on prepaid cards will be available in April 2018.
However, that doesn’t mean that prepaid debit cards are always the best option. Here are a few reasons they might not be right for you:
They don’t help create credit. If you’re looking to build your credit score, you should consider a .
It’s not the best way to budget. A lot of cards charge monthly fees — the average of a study by NerdWallet was $4.67. Take a look at some of them below.
Certain accounts at banks offer greater incentive to invest in savings. Some online savings accounts have interest rates north of 1percent annual percentage. There are also new banks such as Chime which offer rewards by saving. The debit card transactions are round by the closest dollar and the cents go into an account for savings. At the end of each week, you earn a 10% bonus on all the cents that have been rounded, up to $500 in a year.
See alternatives and compare interest rates
About the author: Spencer Tierney is an expert on deposits and certificates at NerdWallet. The work of Spencer Tierney has been highlighted in USA Today and the Los Angeles Times.
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