Prepaid debit cards are absolutely great budgeting tools. That’s because to use them, you must save a little and you must plan a little – and that’s what budgeting is all about after all. So here’s how they can be useful.
Start out by identifying a particular part of your budget that you want to take better control of. Let’s say, you start with your discretionary spending, your “mad money,” or, as my mom liked to call it, your “adult allowance.” You’ll need to figure out how much you can afford to part with each month and you’ll need to make a commitment to yourself that you won’t spend more than that figure.
Next, you arrange to have that amount loaded onto your prepaid Visa or prepaid MasterCard around the same time each month. Usually this will fall right on or after payday. You can do this by getting into the habit of going to a local retailer (one who sells or supports your prepaid card) and loading it up with cash. Alternatively, you can arrange with several prepaid debit card companies to automatically load your card with a direct deposit of some kind (e.g. from your paycheck). This makes it easier for you to keep the process going on a regular basis and it has the added benefit of maybe saving you a monthly maintenance fee charge. That’s because some companies will waive the monthly maintenance fee if you load with direct deposits.
Once you’ve done that, you should arrange with the company to receive account alerts. These are regularly scheduled email or cell phone alerts that tell you what your balance is and what activity has occurred on your card. You have to know what you’ve spent and what you have left if you’re going to work your budget properly.
Now you’re set. Use the prepaid card for your normal purchases. Go to the movies, buy fast food, pick up some knick knacks; buy whatever you normally would buy with cash or a credit card. But keep track of your balance. That’s the key!
You now have a convenient place to keep track of all your incidental spending so use it to constantly stay in touch with how much money is left. Use it to help you conserve that money so it lasts the month. And use it to discover what you’re really spending your money on – and ways you can save or cut back on the excesses.
Once you get comfortable using a debit card in this way, you can expand its use. You can add money and other areas of your budget to it. Soon, you’ll find yourself spending your money more wisely – and having more of it left over at the end of each month too. Ultimately, budgeting with a prepaid debit card will save you a lot of money in the long run because you’ll be paying as you go and not racking up credit card bills that leave you deeper and deeper in debt. Happy budgeting.
Nick Dunjaski is the webmaster of HowToUsePrepaidCards.blogspot.com.