People often ask me for my opinion on choosing a prepaid
There are many reasons
to get a prepaid debit card. First and foremost, a person benefits from moving
into the banking system.
The first thing I say is that there is no right card for everyone.
Choosing the right card depends on how you plan to use your account. Do your
research now, and it will pay off later.
You have to know what you will want to know first. Then, you should search for
an account that serves your needs.
While the checking accounts offered by most banks tend to have the same set of features, things can
vary dramatically between prepaid cards. A consumer should understand what each
card can do for them.
You need to understand how you will use your card account.
How will you use your funds? How will you deposit your check? Are there any additional
features that could help you do a better job of managing your finances?
How Will You Withdraw
Money from Your Account?
Start with ATM networks. Before you pick a prepaid debit
card, you must determine how you will access cash from your account.
Branch banks offer free access to their ATMs. Prepaid debit
cards – except for the ones provided by a
traditional bank – will not have their own ATM network. Instead, prepaid card
companies join an independent network. Some of the larger networks include:
Both of these networks have tens of thousands of ATMs. The networks place ATMs in grocery stores,
pharmacies, gas stations, and other retail settings. Some banks have added their ATMs to the surcharge-free networks, too.
If you live in a city, it is likely that
at least one surcharge-free network has placed an ATM less than a few miles
from your home or workplace.
Solving the ATM riddle involves two steps. First, you need
to ascertain if a card account belongs to a surcharge-free ATM network. Find out
the location of those ATMs. The surcharge-free networks
publish ATM network maps on their
websites and inside their apps.
Once you know which ATM network you will be able to use,
then you should see if there is an ATM in a place that will be convenient for
your lifestyle. If a traditional bank issues
your card, then the process differs only slightly. You will want to
search for ATM locations on the bank’s website.
How Will You Add Money to Your Account?
Next, ask yourself how you will make deposits. Will you add funds exclusively through direct deposit? If you also receive checks, then you will want to have the option of using your phone to deposit checks remotely.
The Cost of an Account – It Depends!
Finding the right prepaid card pivots on understanding how you will use the account. Earlier, I mentioned how some functions could be more or less useful for different people. It is also the case that the overall cost of having an account can vary depending upon your habits. Most companies reduce or eliminate maintenance fees for months when a consumer makes a direct deposit or deposits more than a baseline minimum to the account. Before you apply for an account, you need to know if you will qualify for one of those discounts.
Find an account that is tailored to your needs
Are there any particular features you would like? It might surprise you, but some prepaid cards will do things that a regular bank would never consider offering. For example, some cards can facilitate the purchase of prepaid card cell phone minutes. Some even offer a discount on the price of minutes.
Some cards allow the consumer to set up sub-accounts. These can be very useful. Some people like to use subaccounts to set aside money for a particular purpose – i.e., a vacation fund or a place to keep allowances for children.
Prepaid debit cards will not improve your credit score. The algorithms used by the major credit bureaus still prefer to focus on how you use credit. Some efforts are being made by a few companies to develop “alternative” credit score models that incorporate payments that everyone makes. They have experimental formals that grade your creditworthiness by how well you pay your utility, rent, and cell phone bills.
In spite of that shortcoming, some prepaid cards can now help you to monitor your score. Monitoring –which may not be the same as giving you your numerical score - is one more example of a service that might not come with an entry-level checking account.
Do you prefer to set up automatic payments for some of your repeating bills? Most people find this to be very useful. Some prepaid debit cards will let you set up an outbound ACH for recurring charges. Be careful, however. If you do not have enough to cover the expense, your ACH will not go through, and you will have to find another way to make the payment.
The best prepaid card for you might be different from the best prepaid card for a different person. You cannot assume that all prepaid debit cards are the same because they are not.
Bottom line: shop around, find the card that works for you, and then use it wisely.
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