I began a prepaid debit card experiment after reading a great article at CNNMoney.com about how prepaid debit cards were being used among the well-to-do. Well, well-to-do depends on your definition. But it was definitely being used by heads of households, people with earnings over $100,000 per year and people who, if they so chose to, could get approved for a regular credit card. This piqued my interest and the thought of a prepaid debit card soon became an action.
I’m at the beginning of month two and so far, so good. I’d rate this experience about an 8 on a scale of 1 to 10. This is largely due to the fact that so far it is keeping me on budget and it allows me and my husband to share money without sharing credit ratings. I LOVE that! “Til death due us part,” some say; “til wealth due us part,” I say. The best way for me to stay happily married is to stay happily separated in funds. Any hew, I digress.
The pros so far:
1) Sharing Funds- It is a good way to share funds with hired service staff such as nannies or babysitters, and relatives, such as kids in college, an elderly mom or even the spouse. This is a safe way of giving someone the finances they need to take care of your children or themselves without the possible threat to your credit report or bank account.
2) Budgeting– This is becoming my favorite pro so far. Being “a woman of a certain bank account” (LOL, I like that. Remember, u heard it here first), I can often allow myself to splurge. I say I’m only going to spend $100 on a day in New York with my kids but it quickly becomes $200 because I’m using my own checking-account’s debit-card which has waaaay more than $100 in it. But when I use my prepaid debit card that I know only has $500 on it for the month, then I’m a lot more conservative.
The cons so far:
1) Fees– I paid $3 for the initial purchase of the prepaid debit card and it costs $3 every time I load it with money and it costs $3 per month for service fees. So, you can clearly see that a prepaid debit card should only be for people of a certain bank account. These fees can rack up. Right now, my plan is to load it with my monthly discretionary income amount once a month for $3 and pay my monthly $3 fee. So, it’s costing me $6 per month in all. When you add in the $3 initial fee, over a year the fees will be $75. This won’t be so bad if it disciplines me enough that I actually spend about $200 per month less on wasteful discretionary spending such as birthday party gifts, eating out, etc.
2) The Negative Perception– I am a woman of a certain bank account and so pulling out a prepaid debit card makes folks’ eyes wander. The industry has done a poor job of showing the good uses of the card. So, whenever anyone sees or hears about a prepaid debit card they associate it with a loser. .
3) Predatory Card Issuers– There are many predatory card issuers who are charging fees per transaction as well as $20 initial fees. The issuers who are charging these exorbitant fees are preying on the lower income households who should not be using a prepaid debit card at all! They need to use a secured credit card and begin building their credit. If you have poor credit, low income and you have $300 or $500 per month to load on a prepaid card, you should put it on a secured credit card instead. This will help you repair your credit and get you on track to keeping it rich.
Stay tuned for this adventure. Let’s see if it works or if I’m just losing $6 per month.
Keeping it rich,