Financial Schools Reviews

New Year’s Day is just around the corner – is one of your resolutions sticking to a budget? Prepaid cards may be a helpful tool.

We’ve previously blogged about prepaid cards being the choice for many without the credit to get a credit card or even a checking account. Prepaid cards seem to be gaining in popularity – even for people with good credit.

I have to admit, I’ve thought about using one of these cards myself, as sometimes it’s just too easy to pull out the credit card and pay for something on impulse. Like anyone else, I’ve cringed after opening at least one credit card statement.

If you’ve at least taken the first step in managing your money, you know how much you’re spending on things like gas, rent, food, insurance, entertainment. The next step is committing to a budget. Why not make it easier on yourself and get a separate prepaid card for each type of expense?

Sometimes it’s hard to budget and keep track of expenses. If you’re having a stressful day, it can be hard to calculate on the fly at the grocery store how much of your food bill you have left to spend at the checkout counter. If you have a prepaid card, when the money is gone from that card, you just stop using it for the month.

What if you run out of money on your food card and you’re only half way through the month? We’re not recommending that you starve your family. Given your experience, though, you might find ways next month to economize and make that food budget stretch out a little further. If nothing else, you may realize how fast you are going through your money and that kind of awareness is beneficial.

If you do decide to go the prepaid route, you have to be aware that there are strings attached with using them, in the form of fees for using and loading the cards with cash. Before you get one of these cards, you should do a cost comparison: are credit card interest and fees more expensive than prepaid cards? Here are some of the hidden traps:

• Sign-up or Start-up fees
• Transaction, POS, or Usage fees
• ATM Withdrawal fees
• Monthly Maintenance fees
• Reloading or Recharging fees
• Balance Inquiry fees
• Monthly Statement fees
• Cancellation/Refund fees
• Insufficient Funds/Overdraft fees

Of course, the optimal solution is to spend only what you can afford without going into credit card debt. But if you feel you need a little help, prepaid cards may be a cheap tool to use.

How about you? Have you used prepaid credit cards to your advantage? Tell us about it by leaving a comment!

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