One of the biggest challenges in personal finance is effectively budgeting your money. While there are plenty of tools available to help you manage your money, they are often expensive or time-consuming to learn and use.
One of the hidden gems of prepaid cards, however, is their ability to help you track your spending and manage your money. In fact, prepaid debit and credit cards can help you stretch your dollar in several ways:
- Debt: With credit cards, it’s so easy to go deep into debt. Credit card debit is arguably the number one budget buster for most folks. But with prepaid credit and debit cards, debt is literally impossible. You spend only what you’ve already deposited onto the card, so you can’t go into debt. Even Dave Ramsey recommends prepaid cards!
- Direct Deposit: Many people can’t qualify for a checking account, usually because a bank has reported their account to ChexSystems. Without a prepaid card, most take paychecks and government benefit checks to expensive check cashing stores. Not only do they cost an arm and a leg, but they are inconvenient, unsafe, and time-consuming. With a prepaid card, you can have your paychecks deposited directly onto the card for free. You get access to your money faster and avoid expensive check cashing fees.
- Online & Paper Statements: One of the toughest aspects of budgeting is keeping track of what you spend. With a prepaid card, your expenses are tracked automatically. You can see each transaction online at on your monthly statement. Unlike spending cash, you’ll know exactly where your money went.
- Credit Builder: Good credit can save you thousands of dollars. From lower interest rates on mortgages and car loans, to lower insurance premiums, a sold FICO credit score is really important to your finances. While most prepaid cards do not help you improve your credit (remember, you aren’t borrowing money, and deposits to a prepaid card are not reported to the credit bureaus), there are a few that offer special credit builder features. Eufora is arguably the top rated credit builder prepaid card, but several other cards offer credit-building features. If improving your credit is important to you, check out these offers.
- Low Fees: As demand for prepaid cards have increased, so has the competition for your business. And that’s good news. As more prepaid cards come onto the market, fees have gone down. It’s now possible to get prepaid cards that cost under $10 a month, and depending on how you use the card, there are some that are actually free. Arguably the best low fee card is one you’ve probably never heard of—the Mango Money Prepaid MasterCard. Depending on how much you spend each month, the card can range from $0 to just $5 a month. These low fee prepaid cards cost a lot less than most bank accounts.
- Rewards: While prepaid and debit cards are not know for offering rich rewards, some prepaid cards do. From the FaceCard that offers what they call “prewards” (merchant discounts) to the AccountNow prepaid Visa and Mastercard that offers a $25 bonus when you sign up for free direct deposit and meet certain other conditions, you can find prepaid cards that will put a little extra cash in your pocket.
- No Penalty Fees: Finally, prepaid cards don’t come with all the penalty fees you’ll find with credit cards and bank accounts. There are no over-the-limit fees because you can only spend what you deposit on the card. There are no over-draft fees for the same reason. Late payment fees? Nope. If you are tired of credit card and back fees, a prepaid card may be just the solution.
(Photo Credit: alancleaver_2000)
I think the popularity of prepaid cards will soar especially with so many people having credit issues now. They have learned a lesson during this economic downturn and want to start over and deal responsibly with their money.
Mark, I couldn’t agree more. A lot of people have suffered financially over the last couple of years, and credit card debt has been a big part of it. At least with prepaid debit cards, there’s absolutely no risk of debt.