Perhaps, you have already noticed. Banks now offer a variety of prepaid cards. They are popular to. According to a 2012 report by CardHub.com:
"Consumers loaded $57 billion onto prepaid cards in 2011, a nearly 33% increase from 2010, and that number is expected to rise by 44% to $82 billion in 2012, according to the Mercator Advisory Group. By 2013, the group predicts consumers will load $117 billion onto prepaid cards, which would mark a 200% usage increase in just three years."
With so many prepaid card options, how can a consumer pick the best card? It all depends upon your financial situation. Of course, if you have the money, opening traditional checking and savings accounts at a bank or credit union is probably the best route. There are several articles in this blog to help you decide if moving your money to a prepaid card is a wise choice.
If you are determined to use a prepaid card instead, the best card for you probably depends upon your specific financial situation: how often you are paid, how much you are paid, the format of your pay, your spending and shopping patterns, and if you perform online banking.
In its 2012 report about prepaid cards, CardHub.com presented three scenarios to help consumers evaluate and find the best prepaid card. The three scenarios:
- Scenario 1:a person paid $2,000.00 monthly, whose employer offers direct deposit, visits an ATM once per week, expects to makes five purchases per week with their prepaid card, and pays two bills per month by check.
- Scenario 2: a person gives their teenager a $100.00 monthly allowance. The teenager visits an ATM twice per month and expects to makes two purchases per week with the prepaid card each week. In this scenario, money is loaded onto the prepaid card from the parent's bank or PayPal account.
- Scenario 3: a person paid weekly and earns $1,600.00 monthly, does not have the direct deposit option, and expects to make three purchases per week with the prepaid card. In this scenario, the person must load money to their prepaid card and make ATM withdrawals each week.
Of course, you can pick the scenario that matches or is closest to your financial situation. It might be that none of these scenarios adequately describe your financial situation. Maybe you have more children, earn a vastly different amount, or shop more often (e.g., groceries, lunches while at work).
Of course, you have the option to give your teenage child an allowance in cash and let him or her learn by deciding whether or not to transfer their cash to a prepaid card. Regardless, if is important for both parents and youth to learn the differences between credit cards, debit cards, and prepaid cards. Banks can charge a variety of fees on prepaid cards. Some employers offer banking services, pay their employees via prepaid cards, and administer health care spending accounts via prepaid cards.
In its 2012 report about prepaid card, CardHub.com listed the monthly costs for various banks' prepaid cards for the above three scenarios, and which prepaid cards are not suitable. Some of the monthly costs exceed $26.00, which is a lot ot pay for any banking option. So, it is wise to shop around and do your homework first. Know your pay and spending patters, then compare prepaid cards based on your banking habits.
Whatever you decide, it is wise to revisit your decision after a few months to see if your banking habits changed. A change in pay, ATM withdrawals, out-of-network ATM withdrawlas, and/or spending may make a prior decision no longer best for you:
"... every card has different fees based on the specific usage of each card. How often a person uses an ATM and how much money they load onto the card each month are the most important drivers in the cost of each card..."
If you use a prepaid card, what do you use it for. And what factors influenced your prepaid card choice?