Steve Streit introduced the first prepaid debit card to teenagers who wanted to shop online. Today, more features are being added to not only help you spend but also assist you with budgeting and savings. With practical budgeting tools and incentives, prepaid debit cards allow you to bank without the bank.
The better alternative
Prepaid debit cards are part of a card network like Visa or Mastercard that will work nearly everywhere. You can fill the cards with funds whenever you want any number of times. These cards help people who need an alternative for a checking account because most prepaid cards don’t have overdraft programs and fees. This makes them significantly a better choice. Even if you make a purchase without the necessary funds, the card will just get declined without a fee.
Today, prepaid debit cards provide tools for budgeting. About 54% of the people who use a prepaid card market rely on these tools for making effective budgets.
Moreover, most prepaid debit cards have online facilities, just like banks. You can access your account and also complete mobile check deposits or money transfers. Here are the budgeting tools offered by some cards:
Though the amount you have deposited becomes the spending limit, you can create categories like food, shopping, and bills to set a different spending limit for each category.
Your monthly activity will be summarized as infographics like pie or bar charts. You can analyze your spending habits and plan for the next month.
You can set an amount as the limit. When you are nearing the specified amount or the minimum balance, you will be alerted so that you can prevent a decline.
Similar to categories, you can dedicate the card’s sub-accounts for recurring payments or anything else with a spending limit. These sub-accounts will have individual account balances and physical cards linked to the master account. You can use one card for food, another for entertainment and so on. Kids can also use Sub-accounts. Parents can set limits and transfer money whenever the children need it. Bluebird by American Express and Akimbo offers four to five sub-accounts that are linked to a master account.
Get a chance to win exciting prizes!
Many financial experts have found that people who budget for the sake of budgeting don’t really save much. On the other hand, people who have dreams and need the money to achieve them do whatever it takes to save for them. The interesting point here is that prepaid debit cards have made people save — by introducing several budgeting tools to people who didn’t have the desire to save. People who analyzed the visualizations and summaries provided by the prepaid debit card started saving for the first time.
Moreover, some prepaid cards reward you with prizes for saving. The Walmart MoneyCard by Green Dot Bank has a prize-linked savings program. Recently, they also added a feature called “vault,” which acts as a savings account. The money in the vault cannot be spent unless it’s transferred to the spending balance. The vault also offers chances to win prizes. Each dollar saved is equal to one sweepstakes entry. And you can get up to 500 entries. Every month 499 people are declared as winners and get $25. One person will get the jackpot of $1,000.
Walmart Services say that these prizes are captivating in a low-interest environment. And moreover, Walmart confesses that the real win isn’t the sweepstakes — these initiatives have made people save more, and now they are prepared for emergencies. The savings account balance increased by 35%, from $413 to $572 from August to December. And the number of people who have started using the Savings Vault on the MoneyCard has increased by 233% with 175,000 people. Moreover, all the savings have been done intentionally and manually as there’s no automatic savings transfer option on the MoneyCard.
So prepaid debit cards are the best?
Today, prepaid cards are considered to be a banking alternative. More and more features have been added to prepaid cards since their inception in 1999. In fact, from 2009 to 2012, the number of payments using prepaid debit cards increased by 34%. Thus, these cards are used by millions of Americans as these cards are also getting safer to use.
However, it doesn’t mean that prepaid debit cards are the best available option, mainly because they don’t build credit. Bank accounts offer better incentives to save. In fact, there are a few online savings accounts that have interest rates with an APY of 1%. Some banks like Chime have rewards if you save: the debit card purchases get rounded up, and the remaining cents are transferred to a savings account. At the end of the week, you will get a 10% bonus on all the cents up to $500 per year. Surely, every bank would have rewards and benefits like that. You can research and find out banks that would work well for you if you don’t want a prepaid debit card. If your aim is to improve credit, you can get a secured credit card.