Stay On A Budget Using A Prepaid Card

Not so long ago, my family’s spending was out of control. Not to an outrageous degree, but it was literally out of our control and we went over budget every single month.

It started innocently enough, when my husband and I got engaged. Weddings are super expensive and had the fabulous idea that we would use an American Express credit card to earn points and money back for everything we were spending on the wedding.

Stay on a budget using a prepaid card

The reason you shouldn’t use credit cards, even if you pay them off each month

Some people use credit cards to earn points and cash, even though they have the cash available to buy what they need. They think they are getting some kind of deal or a hidden secret that no one knows about to earn these perks.

Unfortunately, you don’t know what the future holds and something may happen that will cause you not to be able to pay the bill at the end of the month.

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Then you start the vicious cycle of credit card payments.

Stay on top of your spending with a prepaid debit card

To get our lives back on track, we had a few options. Dave Ramsey suggests using an all cash budget system. However, I personally don’t like using cash. I can’t track my spending like I can with a credit or a debit card. I tried using my debit card only, but still ended up spending too much.

By using a prepaid debit card, there is only so much money I can spend. When the money runs out, I know I either have to stop spending or make a conscious decision to spend extra money and go “over budget.” Some moths I still go over budget, but I control that decision and it doesn’t just happen because I lose track of my spending.

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Stay on a budget using a prepaid card

There are a lot of options for prepaid cards.

Store Gift Cards

It might be easy to start off with store gift cards. For example, if you usually spend $200 a month at a specific grocery store, you can buy a gift card to that store and use it all month. Another plus to this is when you can get extra points for buying gift cards. When I know I am going to spend money at Target or Home Depot, I buy a gift card at safeway and earn gas points.

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Visa/Mastercard Gift Cards

This would be a good option to get started, if you don’t know which stores you may be shopping at. However, there is usually an activation fee of about $5 each, so I would only use something like this to test the process and see if you like it.

Prepaid Debit Cards

A prepaid debit card is the best way to go. It has all the advantages of your bank’s debit card, but there it is not tied to your bank and the rest of your money. You won’t be able to buy too many Starbucks and not be able to pay your rent.

Nerd Wallet has a great tool to help you decide which prepaid debit card is right for you.

Some things to look for in a prepaid debit card.

Is there a fee?

Can you withdraw from an ATM?

Can you set up a direct deposit?

I chose to use American Express Serve because there are no monthly fees when I set up a direct deposit. I love that it has the backing of a huge company that I feel that I can trust, and there are no extra fees. Also, as a site note, or cards have been compromised twice in the past year and American Express has refunded the money without a lot of hassle.

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9 thoughts on “Stay On A Budget Using A Prepaid Card”

  1. That’s an interesting idea, especially if you can set up direct deposits and make it weekly. I used to have one for the supermarket, but I didn’t like carrying that much money around at once.

  2. Love using prepaid cards as the equivalent of an electronic (online friendly) envelope budgeting system as you describe here. If you still like using a credit card for rewards, a good compromise is to use the credit card only for fixed, known recurring expenses/bills and use prepaid cards for your variable discretionary expenses. Note that prepaid cards are also a great training tool for your kids & teens (enforced budget, no opportunity for debt or overdraft fees).

  3. Yes, using various cards can help with budgeting. I use prepaid cards from a Canadian company for all the favorite stores we shop at regularly. This company then gives a charity of our choice a rebate of anywhere from 2-10% on average to that charity or organization from those big name stores. And then the beauty is that some of those pre-paid cards can them be used through something like ebates for some 30 stores in common and then I get paid a rebate paid to myself too. Yes, using pre-paid cards is the new money in the envelope budgeting system of today. Thanks for sharing your findings. Can you do something similar with your pre-paid cards where you live?

  4. I am starting to use Visa gift cards as a savings tool build an starter emergency fund. Id rather pile up cards instead of coins in a piggy bank and I don’t want to pay any monthly fees. With these cards the funds do not expire. And can be used anywhere Visa is accepted. The only limitations are the maximum amount of $500 per card and no cash access at ATMs.

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