What’s the Deal with Prepaid Cards?
Effective money management requires the ability to set spending limits. While you might daydream of a future where you can discard your budget and spend without consequences, the reality of today is that controlled spending will help you achieve your financial goals. A smart way to stick to your monthly budget is to add prepaid cards to your financial toolkit.
Prepaid cards work like debit cards with one significant difference. The card is not linked to your checking account, which means you must pre-load or deposit money onto the card to use it. But, like debit cards, it can be used almost anywhere. As long as the major credit card company listed on the card, e.g., Visa®, is accepted by a merchant, so will your prepaid card.
Most prepaid cards allow users to withdraw cash or load additional funds at participating ATMs. Once the card’s balance reaches $0, cardholders can reload, recycle, or discard the card.
The ability to use the prepaid card as a credit card is one of its most attractive features. Make purchases online and in-store without worrying about repayment or additions to your debt obligation. Like credit cards, prepaid cards offer protections. Details vary by credit card issuer and type of prepaid card, but most provide fraud protection and limit your liability if the card is lost or stolen*. Since there’s no credit check required, individuals with no credit or poor credit histories can experience the benefits of using a prepaid card.
Types of Prepaid Cards
Reloadable Prepaid Cash Cards
A reloadable prepaid cash card can help with budgeting when used to pay for designated expense categories. For example, Sarah Saver’s monthly entertainment budget is $80. At the beginning of the month, she loads the card with $80. Over the next two weeks, she uses her neighborhood ATM to withdraw $40 in cash for a baseball game, spends $20 at the local movie house, and purchases $10 in magazines at the bookstore. As the card balance decreases, she will need to slow her entertainment spending. For Sarah to remain committed to her budget, she’ll wait until next month before adding more funds to the card for entertainment expenses.
Some prepaid cash cards can be reloaded as often as you like, while others may have reload restrictions. **
A gift card is another type of prepaid card. Prepaid gift cards make the holidays and special occasions stress-free and budget-friendly. They encourage a spending limit and help you stick to it. For example, Martin Money has a holiday gift-giving budget of $150. With ten nieces and nephews under the age of 12, buying each one of them a gift would be tough with limited funds. Instead, Martin gives each child a gift card valued at $15. The kids are thrilled to shop for themselves and buy what they would like with their cards.
Once the balance reaches $0, gift cards can be recycled, discarded, or sometimes reloaded. **
A prepaid card can solve budgeting and gift-giving challenges. Hughes Federal Credit Union offers members Reloadable Prepaid Cash Visa® Cards and Prepaid Visa® Gift Cards. Prepaid cards are available for purchase when you visit a branch location. Reload your Prepaid Cash Visa® Card by phone, online, or by visiting your local branch.
*Prepaid card protection may require card registration with the issuing financial institution or credit card company.
**Load fees may apply.