Best Budgeting Tool I’ve Found – The Prepaid Credit Card

I recently did a review of the available pre-paid credit cards, and the one I now use was head and shoulders above the rest. Why use a prepaid credit card? Simple – budgeting. When I was about 19 and at university, a friend of mine named Georgina explained that having a job meant not worrying about money too much, and being to eat out when you wanted. That idea stuck with me for the longest time, and I am constantly amazed by how much frivolous spending on the tiny items adds up each month.

While I have never believed in credit card debt as a good way to pay for anything (aside from the time I really needed a new CBR-939 in San Francisco), the large limits I have on my cards mean that I spend willy-nilly and never run out of funds. So long as I pay them off each month.

I tried using mint.com, to track my spending but lack the discipline to do so on a regular basis. I thought about carrying cash, but find change annoying at best. So my answer was to get a pre-paid credit card that I can use online and in coffeeshops for my so-called “discretionary spending”. I then just have a direct transfer each month from my checking account. Reasons it works for me:

1. I have a morbid fear of not having enough money to pay for something at a checkout, so I check my balance before I buy something. Compare that to shopping, and then seeing how much I’ve spent.
2. When it’s gone it’s gone. I can’t spend any more than my budgeted amount. It’s more of a debit card in this way, though debit cards allow you to spend more money than you have so that the issuing bank can charge you a whole tonne of fees. Did I mention I hate Bank of America
3. The one I selected also has a high yield savings account – and I mean outrageously high – so that if I don’t spend my budget, I can put funds in there to feel good.

I know the cons – the fact that they have my money and I get no interest (compared to the paltry interest I get from my current account) but as soon as you louse up a payment on your current account, the $40 fee you get charged wipes out the interest for the year.

Which pre-paid credit card is best? I went with Mango. I didn’t like UPside’s charges, and Mango has no fees as long as you make a decent direct deposit each month. It comes with a nifty iPhone app, and so far it’s been running like clockwork. Also, they pay interest, and you can do any number of things like bill pay and such if you want to.