The holiday season finds most of us doing plenty of shopping to find the perfect gifts for our loved ones. As the pandemic goes on, people have been turning to online stores for their holiday gift search. Most online purchases, as well as some in-person ones, require a credit or debit card – but not all of us have one. Prepaid cards may be a convenient alternative to these forms of payment and to cash, especially as many stores are no longer accepting cash for sanitary reasons. So what are prepaid cards, and how do you decide if they’re right for you?
What are prepaid cards?
Prepaid cards have money loaded onto them before use. They can be purchased online or at various stores, often including grocery stores or pharmacies like CVS and Walgreens. Since you can purchase these cards or receive them as gifts, they are different from credit and debit cards because there’s no application process or financial institution involved.
In some cases however, you may receive a prepaid card from a financial institution, government agency, or your employer. Government benefit cards may be used to issue benefits such as unemployment or SNAP cards. Employers may distribute your wages with a payroll card if you don’t have direct deposit set up.
Take our 5-minute FA$Ttrack crash course on prepaid cards to learn more.
How do I decide if they’re right for me?
1. You don’t have a credit or debit card
If you need to make a purchase that requires a credit or debit card, but you don’t have one, a prepaid card is an easy solution. Instead of going through the approval process or tying your card to a financial institution, you can simply pick up a prepaid card and add whatever amount you want to it.
2. You’re worried about debt or bills
With prepaid cards, you’re generally only using money that’s already on the card, so there’s no risk of getting into debt. While you won’t be building credit by using a prepaid card, you also won’t be hurting it. You also won’t have to remember to pay any bills, which can be especially helpful at this hectic time of the year!
Use Liberty Bay’s Debt Management and Bill Pay resources if these are areas of concern for you.
3. You want to learn or teach about financial responsibility
Prepaid cards offer a great skill-building opportunity. Whether you want to build your own financial skills or you’re teaching someone else, such as a child or newly independent person, prepaid cards can help you practice using a debit or credit card without the potential associated risks.
Along with this, prepaid cards can be helpful for parents disbursing allowance to their kids, especially if they’re buying gifts for friends or loved ones. It gives them the freedom to make purchases while teaching them to be responsible about their budget and build healthy financial habits.
4. You have a budget you need to stick to
If you want to be sure you don’t go over your budget when it comes to buying gifts or other types of spending, a prepaid card can help you stick to your budget because you can control how much money goes onto it.
However, if your budget is very tight, it’s important to remember that prepaid cards do sometimes come with fees for activation, reloading, or some transactions. A different option to consider in this case is Liberty Bay’s Debit MasterCard. This card comes with CardValet, which allows you to turn your debit card “on” or “off” as well as define and limit how much you spend in different merchant categories.