A report by Pew Charitable Trusts indicated that about 12 million people use prepaid cards. Moreover, nearly 800 million transactions amounting to $20 billion were completed in 2003 alone. By 2015, the volume of prepaid card transactions had soared to about $317 billion, according to Business Insider Intelligence. The figures prove that consumers value prepaid cards, which are not going anywhere anytime soon.
Those who currently face financial challenges – or have faced them in the past – can benefit from using prepaid cards to pay their bills, curb overspending, and get a better handle on their financial situation. Keep reading to find out more about how prepaid cards can help consumers get their finances back on track after a setback.
A Way to Monitor Your Spending
A study by the Center for Financial Services Innovation reported that more than half of all adults are struggling financially, and nearly three quarters of the population studied did not even have a savings account. On top of that, the study reported that 77 percent of the individuals surveyed regularly use prepaid cards as a way to monitor their spending, to assist in budgeting, and to pay bills.
Many financial crises can be traced back to money mismanagement, and the ability to control one’s spending is one of the most notable benefits of using prepaid cards. People who like the envelope budgeting method—which entails separating cash into specific categories such as housing, food, and car payments—often find prepaid cards to be a modern way to follow its principles. Consumers can plan their purchases by allocating money to specific categories and loading one or more of their cards. Once the money is gone, they must decide whether they will take money from a different category or simply not spend any more on that category until the next time the category is replenished.
While prepaid cards undoubtedly make budgeting easier, there is still a substantial amount of effort required by the card user. It’s important to understand monthly, weekly, and daily expenditures and how they affect reload amounts. Consumers should prioritize their most critical expenses, then move on to any other expenses that are considered needs instead of wants.
A Better Alternative to Banks
Many prepaid card issuers advise their customers that prepaid cards are a better alternative to banks because any associated fees are stated upfront, and consumers don’t have to worry about unpleasant surprises such as overdraft or other fees. Checking and savings accounts feature a long list of disclosures and fees that can be difficult to decipher, particularly for those who may have experienced money management issues in the past.
In some instances, bank debit cards will allow a person to complete a purchase, although that amount is not available in their account. People on a budget often find it easier to use a prepaid debit card because they can avoid the additional burden of added fees from transactions that banks often approve. A prepaid debit card will not permit a transaction to be completed if it exceeds the amount available on the card. This, in turn, often causes prepaid card users to be more careful with planning their purchases, since they know the transaction will be declined if adequate funds aren’t available.
It may seem as if bank locations are plentiful, and this is generally true in major metropolitan areas. However, in certain urban markets and rural areas, access to brick-and-mortar bank locations is often scarce. Prepaid cards afford these individuals the convenience of paying their bills online and over the phone, while also giving them the option of having a powerful budgeting tool.
While sticking to a budget is often easier said than done, using a prepaid card could be the answer to helping those who are struggling financially to make better choices with their money. When choosing a prepaid card, it is important to weigh the pros and cons of each card, as well as to compare them against each other. Some websites offer a handy tool for this purpose. Provided that you conduct diligent research, you are sure to find the best prepaid card for you and to set yourself on the right course toward better financial management.
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