Reloadable Cards for Budgeting?

[Desdemona]

Has anyone here ever used reloadable prepaid cards for budgeting? (Here's an example of one)

I'm thinking about getting a few of them for different budget categories, then setting up an automatic transfer to them each month for the monthly budget in each category.

I've tried just carrying around cash for this purpose, but there are a some places (online) that don't accept cash, so it messes up the system.

Does anyone have any experience or advice about this?

[rolltimer]

Looks like they would be a pain to keep up with if you had more than a couple. I much prefer to use one credit card (Discover), put every purchase or bill on it that I can and pay the balance in full at the end of the month. I get "cash back" points that I can either use to get gift cards or get the cash paid to me or applied to my card balance. This works for me because I'm disciplined about spending money. I don't see the amount of my credit as a license to spend or charge up to the limits.

The only thing I have done in a similar vein to what you are talking about is when I purchased a $20 gift card for a fast food place last December and got a free calendar for the upcoming year with coupons for free or reduced food items each month. The coupons were touted as being worth $30 if I remember correctly. To me this is a good value for essentially tying up $20 in a card. Even with the coupons it won't take long to spend up that $20 if I frequent that restaurant. If I'd left the $20 in savings it would have earned me less than a dollar over an entire year.

What you are proposing to do sounds like you may be transferring well over $20 a month to various cards without getting much value other than the advertised security and convenience of not having to carry cash with you. Prepaid means these companies are using your cash and not paying you for the privilege of holding your money but getting the use of your money as though it were a free loan from you to them. Not good fundamentals for money management.

You don't say anyting about your previous experience with budgeting or with using debit or credit cards so it's hard to offer much advice. Post again with more details about why you find these cards attractive or how you perceive that they meet your needs. Maybe then I could suggest alternatives.

[Desdemona]

Thanks for the response, rolltimer. Some more details: my husband and I always set a budget and can often keep to it for a couple of months, then it kind of slips (sometimes because of forgetting, sometimes because the budget hasn't been enough of a priority).

We have a rewards credit card, but I'd much rather have a budget that sticks than get the small % back from our credit card spendings. Although we have a money market account with a pretty good return, the money that we use to pay off our credit card bill is in a nominal-interest checking account so that it's usable. So it's not like we'd be getting interest from that money anyway.

There is a monthly fee to these cards, so I wouldn't see it as a permanent solution, but the fact that they'd force us to keep to our budget would hopefully get us into enough of a financial discipline mindset that we wouldn't need the cards as a crutch anymore is attractive.

And I like that you can just log on and see how much you have left to spend per category, per month.

If you have alternate ideas, I'd love to hear about them!

[rolltimer]

Ouch! Monthly fees. Maybe your budget hasn't been working because it's not realistic for your needs. Using these cards as a disciplining tool sounds like someone joining a gym and paying a monthly membership fee in order to force himself to exercise. It doesn't work. Only those who love working out in gyms should buy memberships, everyone else should find an activity they enjoy doing and get exercise that way.

A budget should, first and foremost, tell you where and how much you are spending. I started budgeting years ago by writing down in a small notebook every penny I spent and what it went for. Then I sat down at the end of the month and put each expenditure into categories: savings, IRA or 401K, taxes, rent (or mortgage), electricity, heating oil or gas, water, sewer, garbage collection, insurance, car expenses--gas, maintenance, repairs, tag, payments toward loan, groceries, food eaten out, bus passes, clothing, gifts, phone, cell, internet, cable, entertainment, and miscellaneous. You may have more categories than these or you may want to expound on the entertainment category, creating subcategories--books, music, magazines, movies, DVDs, rentals, vacations, etc. After 6 months or so of tracking, I had an idea of what I was spending and I looked for ways to cut back in some areas and increase in other areas. Budgeting is a good way to save for something. Maybe you want to go on vacation in 6 months. Look at what you are spending in areas where it wouldn't hurt to cut back--eating out, movies, concerts, etc.--and put the money you had been spending into a special account, call it your vacation fund and build towards your goal.

[Rebecca]

I think one downfall is that people tend to spend more money when they use cards than when they use actual cash.