On the surface, prepaid cards might only look like a convenient payment tool. If you look closer, you may realize how useful they can be for money management. Here are five different ways prepaid cards can help you manage money:
1. Get your paycheck quicker
Who wouldn’t want to get paid sooner rather than later? When it comes to managing money, it could prevent some headaches if you have bills due before your normal payday or run out of spending cash.
The terms vary per provider, but some prepaid cards can help you get your paycheck up to two days before your scheduled payday.1 You might also be able to deposit all or part of your check, depending on your needs.2 Speed and convenience all in one package.
2. Control your spending
People can spend too much for a lot of reasons. Prepaid cards can be a useful tool to control overspending because you designate how much money is available. They can also help you create mini-budgets if you need to tighten up a few things.
For example, if you think you spend too much on lunches for work, you could load $30 per week on a prepaid card. Once that money is gone, you know it’s time to brown bag it. If you sometimes spend too much on entertainment on the weekend, only use a prepaid card for restaurants and other places. This way you’ll have a balance in mind before heading out.
3. Leave your checkbook at home
1 in 5 people still write checks to pay their bills.3 Although convenient for some, they can also be risky because checks can bounce for many reasons including late paychecks or unexpected debits from your checking account. Either way, your bank could charge you an overdraft fee of up to $35 and the company you tried to pay could also charge a fee.4
To avoid that stress, leave your checkbook at home and use a prepaid card. In addition to avoiding overdraft fees, you don’t have to worry about accidentally overspending before the check can clear. Just load the card with the amount of the bill and pay it off.
4. Track where your money goes
One of the most effective ways to manage your money is to figure out where it goes each month. Some prepaid card providers offer a monthly statement that could make tracking easier. Each time you receive one, categorize your expenses and try to identify spending issues. It may seem like a lot of work at first, but once you start seeing results it can become a healthy habit.
5. Teach good money habits
Prepaid cards can be useful for parents in two ways. One, they can be given as allowances. Two, they can help teach good money management skills.
When the child receives the card, let them know how it works. Make it clear that there’s only a certain amount on the card, and once the money's gone, it’s gone. By allowing the child to make their own choices, they can learn the value of money.
Use prepaid cards to your advantage
Most people use prepaid cards to gain control of their finances.5 There are some things to know about prepaid cards, but if you use them wisely they could benefit you in more ways than one.
- Greendot.com. “Direct Deposit.” Greendot.com. https://www.greendot.com/how-it-works/add-money/direct-deposit (accessed August 13, 2018).
- Greendot.com. “Direct Deposit.” Greendot.com.
- Cutoday.info. “20% Of People Still Write Checks.” Cutoday.info. http://www.cutoday.info/THE-boost/20-Of-People-Still-Write-Checks (accessed August 13, 2018).
- Pritchard, Justin. “You Bounced a Check - What Happens Now?” Thebalance.com. https://www.thebalance.com/you-bounced-a-check-what-happens-now-315337 (accessed August 13, 2018).
- Pew Trusts. “Why Americans Use Prepaid Cards.” Pewtrusts.org. http://www.pewtrusts.org/~/media/legacy/uploadedfiles/pcs_assets/2014/prepaidcardssurveyreportpdf.pdf (accessed June 14, 2018).