If you’re like most Americans, your bank account balance averages less than $1500 a month. We’ve all been there–the fact is saving is hard and spending is easy. We all know this. What many of us don’t know is that banking fees are depleting your […]
Some people benefit greatly from prepaid cards. Others don’t. Here are my thoughts…
You don’t need a prepaid card if:
1.) You can get a credit card…
It’s happened to many of us. You open the letter and to your dismay you find that your credit card application wasn’t approved. In fact, millions of credit card applications are declined each year. It can happen even to those with reasonable credit who are left wondering why. It’s not always an easy answer, either. Perhaps it’s your income, your employment history, your age, your debt load, or you simply went through a rough financial stretch in recent years.
If you were approved for the card of your choice it’s possible that you have no use for a prepaid card. But (and this is a big but) that’s only if you also fall into the next category…
2.) …and you pay your entire credit card bill on time…every, single, time.
This is the BIG catch. Nearly 40% of American households have credit card debt, and the average American household that has credit card debt owes more than $16,000 on those card. In fact, Americans owe over one trillion (that’s twelve zeros) in card debt. Ouch!
Why do I say “entire credit card bill”? Many people have no idea that if they pay even one dollar less than their full statement amount, they are charged interest on the entire statement amount! So, if your statement is $1,000 and you pay $999, you will still be charged interest on the entire $1,000. This is the great secret credit card companies try to keep.
It’s very possible that those paying their entire card bill each and every month shouldn’t bother with a prepaid card. You’re being responsible and you’re contributing to a healthy credit score. If you’re one of these, keep enjoying the little perks you receive with your card.
If you’re reading this with a heap of credit card debt, don’t despair! It’s time to layout a spending plan and a debt-free credit card alternative. You can conquer that debt. You don’t have to remain a slave to your bills.
3.) You track every purchase.
You know that feeling when blood rushes to your head and to your feet. Your heart rate accelerates and your blood pressure spikes. I’m not talking about Tower of Terror, but something much scarier. I’m talking about the moment you open your monthly statement to discover one or two more zeros than expected. Gulp!
Sidenote: This could lead us to the most dreaded monster. The nightmare of any grown adult. Ah, yes. The dreaded ‘B’ word: the budget. A budget is not the best way to manage your money. No. A budget is the only way to manage your money. Let’s save the ‘B’ talk for another post. (Steps To Budget Like A Boss!)
If you were approved for your credit card and you pay your entire bill every single month, it’s still entirely possible that a credit card is still hurting your finances simply because you don’t track each of your purchases and you find yourself overspending. Sure, you’re building your credit by paying your bill but you’re still preventing yourself from getting the things your really want because you overindulged in large double-shot vanilla iced latte’s each morning. There goes $146.39 per month.
If you haven’t experienced that limb-numbing feeling of credit card statement shock because you track your purchases there’s a pretty good chance you have no use for a prepaid card to help you spend responsibly. Go treat yourself to a ride at Tower of Terror.
4.) You’re happy with your bank fees and mobile services.
What do bank fees have to do with prepaid cards? You see, your prepaid card isconnected to a true bank account. In fact, you’re even issued an account number which you can provide to your employer, government, or friend for direct deposit.
Prepaid cards are being used by many not merely as a payment method but rather as their exclusive account. Face it: how often do we really need to go to into a bank? The majority of us enjoy managing our own funds any time through our mobile devices. Whereas many banks release unsatisfactory banking apps as alternatives to visiting the building, prepaid card providers are offering apps as the exclusive access to your money. This means that they take a great deal of care into ensuring your mobile experience is seamless.
If you’re paying very low (or no) fees at your bank…you may not have any use for prepaid cards. For the rest of us the right prepaid card holds a lower fee than traditional banking. Some cards are even offering no monthly fee when you load a certain dollar value per month. Often those dollar values are automatically achieved just by setting up direct deposit.
So if you’ve:
1. been approved for a credit card, and
2. you pay your entire bill every single month, and
3. you track each purchase on your card so there’s no terror when the statement is due, and
4. you’re paying low/no fees at your existing bank…
…carry on and enjoy your day 🙂
For the rest of us, a written monthly budget paired with our prepaid card & mobile app will help lead us to financial peace of mind.