Some people say prepaid debit cards are useless. I disagree.
In fact, I used a prepaid debit card right after graduating high school. It was helpful to me in many ways. I think a prepaid debit card can be very beneficial to the right person.
A prepaid debit card is a basically a card that works just like the debit cards your bank issues, only it isn’t attached to a bank account. That means you need to load money onto the card and can only spend what you add to it.
These cards are usually either Visa or Mastercard so you can use them wherever these are accepted. While there are some benefits of using prepaid debit cards, there are also a few drawbacks.
In this post, I’ll explain how using a prepaid debit card can help improve your finances along with that to watch out for.
It’s Practically Impossible to Overspend
Since you’re loading a prepaid debit card with your own money, once you spend that money, you can’t use the card for purchases anymore.
This can be a great tool to help you budget without overspending and without dealing with cash. Let’s say you like the idea of using cash because you can avoid the temptation to overspend. However, you don’t feel comfortable carrying wads of cash around or are afraid you’ll lose your cash envelopes.
Using a prepaid debit card is the perfect compromise. You can make purchases and pay bills just like you normally would. You won’t want to worry about borrowing more than you intended like with a credit card, and there are no overdraft fees like with a regular debit card because you can’t overdraft.
A Solid Alternative If You Don’t Like Banks
Believe it or not, some people don’t like using banks and that’s their right. In the past, I was burned bad by a few different banks and I just wanted to take a break and really understand how to manage my money and define what I wanted in a bank before getting another checking account.
During that time, prepaid debit cards were a crucial solution to me.
Sometimes banks change a lot of unnecessary fees whether it’s a minimum account balance fee, an overdraft fee, or a monthly maintenance fee. My current brick and mortar bank charges a monthly fee if you don’t set up direct deposit and that can be a hassle for some people who actually prefer a paper check or cash.
If you still want to cash your own paycheck and avoid the politics at the bank, a prepaid debit card is a solid alternative.Some people say prepaid debit cards are useless. I disagree. Click To Tweet
Many Cards Now Have No Monthly Fees
Most prepaid debit cards have improved over the years. I remember a lot of cards came with pricey fees in the past, but that’s just not the case anymore.
If you’re looking to avoid costly bank fees and have a simple way to manage the money you have, consider some of the top prepaid debit cards like Bluebird by American Express, Movo virtual prepaid Visa card, and Akimbo. All have no monthly maintenance fees.
By avoiding unnecessary fees, you’ll save money and can focus more on managing your finances over trying to meet strict requirements.
Shop For the Holidays Safely and Avoid Debt
Shopping for the holidays can be overwhelming at times. On one end, you may not want to use a credit card if you fear you’ll overspend. It can be so tempting to grab that extra item in the store especially during the season of giving and cheer.
What many people don’t realize is that overspending during the holidays can set you up for financial disaster the following year. Do one wants to go through the first few months of the year with debt and an unorganized budget.
It can take consumers several months to a year to pay off holiday debt. By that time, a new holiday season has already rolled around and you’re not prepared for the additional expenses.
While you could carry cash, there’s always the risk of losing it or getting pickpocketed and lost or stolen cash is untraceable. If you use a prepaid debit card, you can get the best of both worlds without dealing with any of the drawbacks.
Using a prepaid card is safer than cash but it will also help you stick to your holiday budget since you can’t overspend.
A Stepping Stone as Your Regain Control of Your Finances
I often recommend people who are looking to start over again with their finances consider using a prepaid debit card for a bit. If you have bad credit or had your account overdraft at banks in the past, you may be charged more fees or denied access to certain products.
While it’s common to consider using a prepaid credit card to rebuild your credit, you also need to work on controlling your spending habits and living below your means.
A prepaid debit card can help you do this because it conditions you to work with the income you have. Once you prove you can manage the money you have, then you’ll have access to other perks and benefits like a high-interest checking or savings account and rewards credit cards.
Almost anyone can qualify for a prepaid debit card since the requirements are not strict.
What To Watch Out For
Prepaid debit cards are not the best solution for everyone. While they do provide a variety of benefits, there are also some drawbacks to consider before using one.
- Some do come with unnecessary fees that are very difficult to waive. So, be sure to consider the low or no fee cards.
- Prepaid cards don’t help you build credit. But, you can use them as a stepping stone to improve your spending habits and budgeting skills.
- No FDIC insurance that the bank offers. If this bothers you, a prepaid debit card may not be the only place you wish to store your money.
- No general bank features (checks, interest-bearing accounts, etc.)
Have you ever used a prepaid debit card before or could you consider using one to improve your finances?