Protecting your money and staying on budget with prepaid cards

Sometimes I like to pass the time by playing games on my iPad. I have downloaded various apps for puzzles, slots, and of course Angry Birds. A few months ago my friend, Keith, decided to hijack my iPad and partake in some of this frivolous entertainment as well. 

Now before I get too far in to how the events went down, let me start by saying this was his first time playing these games. Let me also preface that he is not very technologically savvy. At least not with the mobile devices.

While he was pretty content playing solitaire, I mentioned there were plenty of other games he could try. Being the kind person he is, he didn't want to "mess up" my high score. I insisted he give them a try, and said "let the games begin". 

Have you experienced a financial loss?

First up was one of the slot machine games I had played during a business trip. I think I was up about $100, and as he increased the winnings to around $2000, he joyfully let me know, mainly by hooting and hollering something along the lines of "who's your daddy".  However, about an hour later, the joy quickly left, as a more frantic expression flooded his face. As he enter the room, looking pale as if about to tell me he had just ran over my puppy in the driveway, he informed me he lost it all. Yep, he went bust...

For those of you who don't waste your time playing these silly games, let me explain. When you lose all of the funds in the imaginary account, you can purchase more, for real money. Or you can choose to wait for the allotted time on the clock to reach zero to earn a few coins in your account.

Seeing how the first option popped up across the screen, he believed he had lost a couple thousand dollars. Not $2,100 imaginary dollars, or $2,100 worth of bitcoins, but 2,100 real green Washington's. 

After the hysterical crying, and the beeline sprint I made to the bathroom, both caused by my frenzied laughing, I explained how the process worked. He was relieved, there was no kneecap busting going on, and now I have this story...

Protecting your money

Don't want to experience that same feeling of complete despair as he did? Consider a pre-paid Visa or MasterCard when your children (or you for that matter) are attending outings, summer camp, or even vacationing family and friends.

There are some great ones out there, and it's a really easy way to protect against loss. If the card becomes lost you simply report it and they reissue a new one. Not so easy to do with cash, right? While I haven't actually tried this theory yet, if I lost cash and called the Federal Reserve to reclaim it, I think they may have the same side-splitting reaction I did above.

There are some downsides to a pre-paid card though... If you lose a card (bad), they "reissue" a new one (good), but most card companies will mail it to your home address (bad)... Doesn't help when you need it right then, but at least you won't be at a complete loss.

A benefit to the card is that you can split funds between multiple cards. Let's say little Sally wants to go on a two week vacation with her best friend's family. You shell out $200 for incidentals (i.e. meals and enough to hit the gift shops). Instead of giving her one $200 card, split it into four $50 cards. That way if one is lost, she isn't stuck in a bind. Just make sure she doesn't carry them all at once. The downside is that you may get hit with four sets of fees. 

Fees to look out for

Before loading your basket full of cards at the register, check out all of the associated fees... Here is a list of cards we researched through Bankrate, and some of the fees to look for:

• Activation fee: This could range from $0.00 to $9.95 depending on the issuer or type of card.
• Monthly fee: Some charge you a fee just to have it sitting in your wallet. The range was $0.00 to $7.00, which could quickly drain the available funds on the card.
• POS fee: Some will offset the activation or monthly fee by charging you a per transaction fee. In some of the ones researched, it ran $2.00 per transaction.
• Non-Issuer ATM: This may not be a problem during a trip, but when returning home, you may want to deplete the card's balance as soon as possible to avoid the monthly fee... That's where they get you. The average fee ran $2.25.
• Inactivity fee: If you don't use your money in time, they certainly will. The highest fee of the ones researched was $5.95. Stack that with a $7.00 monthly fee and it can add up quick!

Staying on budget

Prepaid cards are also a great option for those trying to stay within a budget. Loading a precise amount limits some of those unplanned purchases, helping you stay on track. While there are fees associated with these cards, the few dollars per transaction you'll be out probably outweighs the overdraft fees you'd get hit with using a debit card connecting to a checking account.

Depending on your needs, choose the card that's right for you. Some cards offered better online purchase options than others, which could be beneficial for online bill payments. 

Others offered better point of sale (POS) transaction fees (in person, in store), which would be more beneficial for picking up groceries, gas, and other spending.

So whether you grab a few for vacation, or just to keep your own spending on track, prepaid cards can definitely be a win for many.

~Michelle

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"Image courtesy of Stuart Miles, published on 25 February 2013 Stock Image - image ID: 100142298FreeDigitalPhotos.net"