Use Prepaid Cards to Take the Stress Out of Holiday Spending :

Holiday gift-buying can derail your financial planning. Prepaid cards can provide some tools to help keep on track and lower the stress.

It’s the most wonderful time of the year. And most Americans dread it, according to a Lending Tree poll. Why? In a word–overspending.

Most consumers feel under pressure to buy holiday gifts for family members and friends and that can lead to poor financial decisions.

But holiday spending doesn’t have to lead to breaking the budget or large credit card payments in January. Using a prepaid card as a holiday spending (and budgeting) tool may offer one solution to help put the spending stress in the backseat.

Using Prepaid Cards to Avoid Debt

There’s nothing more stressful than feeling your finances are out of control–like that financial hangover when you get your January credit card bill.

By their nature, prepaid debit cards limit your spending to what you have, not what you borrow. You’re limited to spending what you’ve loaded on the card. Once the card’s balance is zero, your shopping is done. Whether you use a prepaid card as your primary spending card or just as a means to control discretionary spending at the holidays, they keep a check on the temptation to spend more than you have.

Leverage Your Prepaid Card to Stick to a Holiday Budget

Setting a gift budget in advance of the holiday season is a great idea, but most of us need a little help sticking to it. Several prepaid cards offer tools to curb the urge to break it.

Real-Time Alerts for Spending Limits

The  Netspend® Visa® Prepaid Card, for example, allows you to set budget categories through its online portal. You can use those categories not only to set a maximum gift allowance for yourself but also to cap spending in other discretionary spending categories to fund your holiday expenses. You can even trigger mobile notifications when you’re getting close to your budgeted limit.

Digital Envelope Budgeting

If you’ve ever tried a budget, you’ve probably come across the envelope method. The idea is to create an envelope for each spending category and put cash in the envelope to fund the expense. When the envelope is empty, you’re done spending for that category for the month.

FamZoo Prepaid Card offers a digital version of envelope budgeting with its prepaid card. They call them “IOU accounts,” but the idea is the same. FamZoo allows you to segment funds by categories. The IOU accounts are your digital envelopes.

Even if you’re not ready for a full-blown budget, those digital envelopes provide a great way to set limits for gifts or even gifts for each person.

Stretch Your Spending Dollars

With your gift budget in place, you still want to get the most bang for your buck.

Some prepaid cards offer cashback or rewards that can help stretch that budget a little further. Green Dot offers a card that pays cashback for all purchases.

Walmart’s MoneyCard also pays cashback for all purchases, with up to 3% for purchases made at Walmart. Some prepaid cards offer points that can be applied to store purchases. And let’s face it, we all find ourselves at Walmart at some point in our holiday shopping.

Save Up for Holiday Shopping

Ideally, saving for holiday shopping should start early in the year. But even if time is short, you can still use savings tools offered by prepaid cards to prepare for the extra expense.

A number of cards, like the Walmart MoneyCard and RushCard, offer a way to set aside savings. The MoneyCard calls it a savings vault. RushCard calls it RushGoals. But the concept is the same. You transfer money from your primary balance to the savings account, using the card’s app or its web portal. That money is now unavailable to spend until you transfer it back to your spending account.

Some cards even offer interest on your savings balance. Cards like the  PayPal Prepaid Mastercard® or  Brink's Prepaid Mastercard® cards offer a 5% APY on savings balances up to $1,000. Over the year, that can provide a little extra to add to the holiday gift budget.

More importantly, just limiting your holiday spending to the amount that you’re set aside ensures that you stay on target with your goals.

Safe and Secure Shopping

With all the hustle and bustle of the holiday, no one wants the additional concerns about security when shopping online or in stores.

The good news is that prepaid cards have the same Visa and Mastercard protections that come with credit cards. That means that you’re protected against fraudulent charges when you use your prepaid card.

And prepaid cards have the same protections as bank debit cards if the card is lost or stolen–one less thing to worry about.

Enjoy the Holidays

Prepaid cards can help take a little financial stress out of the holiday season. And that’s important.

But it’s really about how we choose to approach the holidays and the gift buying that can be a source of financial stress.

Perhaps we can all take a moment to think about our best holiday memories. For most of us, those memories have nothing to do with gifts.

Author: Mike Clark
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