Author Topic: Bank Account vs. Prepaid Debit Card for Everyday Transactions  (Read 5275 times)

aspiring mustachian

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Bank Account vs. Prepaid Debit Card for Everyday Transactions
« on: December 07, 2013, 10:15:59 AM »
I've been using prepaid debit cards rather than a checking account for the past 4 years. I had a checking account years ago and screwed it up big time. Basically, I had a medical procedure done and while I had the money for that and to cover incidentals, there were some unforeseen complications that required me to stay in the city in which I had surgery. Between the Percocet and trying to stay caught up with schoolwork, I didn't keep a close enough eye on my balance, so when I was well enough to go home, I was hit with a nasty surprise. I still owe money to that bank and I will pay that debt. However, I'm sure that the information is and will remain in ChexSystems for at least another year or two.

So this is my question: is it worth enrolling in a second-chance checking program or continuing to use a prepaid debit card until the negative ChexSystem information drops off?

My situation:

The Walmart Money Card has no monthly fees as long as at least $1000/month is loaded onto it. Loading that much via direct deposit will be no problem for me. The biggest disadvantages are that I can't do automatic monthly payments and I have to pay check cashing fees if I get a check that's drawn on a particularly shitty bank, like Bank of America, which charges $6 to cash a check drawn on that same bank.

OTOH, not putting my finances on autopilot means I have to pay more attention to them, which forces me to focus on my financial situation on a regular basis rather than when I feel like it. I pay some of my bills, like rent and utilities, with cash. Those two things are under my partner's name, so I give him the cash for my half of the household expenses. The cell phone bill is paid online via debit card. My student loans are paid with the card over the phone (no fees) or with a money order via mail. I rarely get checks; when I do, I just go to Walmart because their fees are very low for checks under $300 (i.e., just about all of the checks I get) and it's within walking distance of my house.

I don't like checks and even when I had a checking account, I didn't use them. I'd rather pay the $.70 for a money order from Walmart or go to a check cashing place and get a free money order. That way, I don't have to worry about things being on hold and potentially finding myself with far fewer funds than I thought because I forgot to write down the information from that check. It's a relatively cheap way to insure that my forgetfulness and unmedicated ADHD don't trip me up financially.

I don't plan to buy a house because I can't stand the idea of being tied to one place for 30 years or being stuck trying to sell a house if I want or need to move. I don't plan to take out loans or get a credit card. For my situation, I don't really see a reason to have a checking account.

Having looked into second chance banking programs, I saw that a lot of them charge fees that are more than my prepaid debit card. If I don't deposit $1000 onto my MoneyCard, I am only charged $3 for that month. The lowest fee I saw for a second chance banking program at a bank in my area is $8/month, regardless of the account balance or how much is deposited into the account every month. Given that, I'm not inclined to give up my bank-free ways, at least for the next year or two, if ever. Other companies have found ways to provide the services that I need for free or at a very low price, so to me having a checking account is a lot like having a cell phone contract in that I'd be paying for a lot of other stuff that I don't need or use when there's a cheaper and suitable alternative.

Is there something else that I've missed?

I know that at some point I will need to open a savings account in my name. In the meantime, I plan to open another debit card for that purpose and keep it stowed away in my safe or use the old trick of putting it into a container filled with water and freezing it until I'm sure that I'll pass a ChexSystems verification and can open a savings account that doesn't charge ridiculous fees for an account that's in good standing and well above the minimum balance.

jesstach

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Re: Bank Account vs. Prepaid Debit Card for Everyday Transactions
« Reply #1 on: December 07, 2013, 11:49:03 AM »
Have you looked into Bluebird by AMEX? It's also a Walmart product. https://www.bluebird.com

It's a prepaid card but also functions as a bank account. You can set up direct deposit through them and also make deposits at Walmart (either Money Center or at a cash register). There's no monthly fees. With direct deposit you get free ATM use at Walmart ($2  fee at other ATMs).

It has bill pay online, although I don't know if you can set it up for automatic payments. I know that "pulling" the money from BB usually doesn't work. For example, if you give the electric company your routing number to bill monthly, that won't work. You would have to go into BB and do bill pay through their website. Once you pay a bill, the amount is automatically deducted from your balance so you can't spend more than you have.

It also has checks. You need to "pre-authorize" the checks which deducts the amount from your account immediately. So, again, you cannot overdraft.

Your pre-paid card will work anywhere that AMEX is accepted. Which isn't everywhere, so that may be the only downside. But you could always use cash for those instances.

Argyle

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Re: Bank Account vs. Prepaid Debit Card for Everyday Transactions
« Reply #2 on: December 07, 2013, 02:19:25 PM »
What are you doing with this debit card/checking account?  I mean what kinds of things are you paying for?

My advice would be to get cash out of the bank.   Both checks and debits cards are abstract.  You're saying "Which system will keep me from overspending by accident?"  I'd suggest that not having the cash in your pocket will keep you from overspending.  You may have a few bills you need to pay by check.  (That would probably be true even in the debit card scenario?)  For the rest, go to the bank once a week and take out the money you've allotted for your weekly spending.  (Or if it's a lot, go twice a week and take out half the amount.)  When you've spent it, you've spent it.  In the absolute worst case scenario, you go on some kind of compulsive spending binge, go back to the bank, recklessly take out more money, and spend that too.  There are a lot of built-in places to slow you down there, but say you do that.  Okay, at the end of the month, you're left with no cash.  Which you then obviously can't spend.  So problem solved, consequences felt.

Now, if you were left with no cash, and you had vowed to spend only cash, and you could get around that by knowingly cashing a check for money you don't have, then you have greater problems with compulsiveness and need some professional help.  But my guess is that your overspending is just a result of the situation not being concrete enough.  Cash makes it concrete.  There's a reason credit card companies all want us to have credit cards -- they make money off our impression that credit-card spending doesn't feel like spending" real" money.  So do your spending with real money.

Greg

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Re: Bank Account vs. Prepaid Debit Card for Everyday Transactions
« Reply #3 on: December 07, 2013, 09:25:45 PM »
I don't get it, if you pay the money you owe the bank you still can't open a regular checking account?

Will

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Re: Bank Account vs. Prepaid Debit Card for Everyday Transactions
« Reply #4 on: December 07, 2013, 09:57:03 PM »
Serve by American Express is another full service reloadable prepaid account with no hidden fees, no minimums, and no credit check.  Check it out:

https://www.serve.com/

If it looks like something you are interested in, shoot me a PM with your email and I think there might be something we get for a referral (not sure though, TBH).

MoneyCat

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Re: Bank Account vs. Prepaid Debit Card for Everyday Transactions
« Reply #5 on: December 07, 2013, 10:33:29 PM »
I would take a look at Suze Orman's Approved Card pre-paid debit card.  It has very few fees and it has a savings option available on it for free.  The Approved Card also allows you free ATM withdrawals from any Allpoint ATM machine (and there are Allpoint machine pretty much everywhere).  I wouldn't bother with a "second chance checking account" and just get ChexSystems straightened out before you get back into banking again.

aspiring mustachian

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Re: Bank Account vs. Prepaid Debit Card for Everyday Transactions
« Reply #6 on: December 13, 2013, 05:50:15 PM »
My apologies for the delay! Windows crapped out and I didn't have a backup XP disc. I'm running on Ubuntu now, thank goodness.

Anyway, to answer the questions that have been posed:

1. I use a debit card for bills and everyday expenses and as a place to store funds so that I don't have cash on my person or laying around. I have a savings account in my partner's name and we have a joint (only in practice) savings account. I realize that that leaves me in a vulnerable position if we were to break up and he decided to be spiteful about the whole thing. I haven't contributed to it in a while due to lack of regular employment and living on a shoestring budget.

2. Shortly before my computer crapped out, I saw jesstach's suggestion about the Bluebird card. I did some research and decided that would be the best option to deposit paychecks. I checked Consumer Reports for more information and decided Bluebird would be my best option for what I want to do, which is to be able to pay my bills when cash is more expensive (like with MetroPCS) or not an option. Consumer Reports rated Bluebird as the best card out of the ones they rated, including the card endorsed by Suze Orman, which was a big factor. (source: http://www.consumerreports.org/cro/2013/07/prepaid-cards-fees/index.htm)

I just got my first decently paying job since graduation, so I figured that with that change I'd go over my current financial setup. To be honest,  I'm very afraid of falling into my old ways of overspending and racking up overdraft fees even though I've been very good about monitoring my spending and keeping enough on hand to cover minor emergencies.

The reason I don't like to carry any amount of cash is because I take public transit and will eventually have to work irregular and late hours. While it's highly unlikely, I don't want to run the risk of losing it via theft or my own stupidity. What's worked in the past is splitting my paychecks between two cards, one on which to deposit paychecks and from which to pay bills, the other as an allowance for non-essential "fun" spending. I almost never use ATMs; I can count on one hand the number of times I've used an ATM this year.

My reason for asking whether it's a good idea to have a bank account is because while I don't see a reason to have a bank account, family members and acquaintances have said otherwise. I haven't heard a good reason other than "well, that's just what people do," so I wanted to know if there was something missing in my reasoning. It makes sense not to bother with a checking account if I don't need to take out a mortgage, car loan, or some other form of debt that's less expensive if one has a preexisting relationship with a financial institution. As stated before, I plan to clear up the old debt from Suntrust but I have no desire to deal with a bank again unless something comes up, like planning to purchase a house. I just need a way to store my money and make it easier to access my paychecks since my employer has made it clear that managers tend not to enjoy dealing with paper checks for employees. I haven't tried to apply for a bank account in a few years, so I don't even know if the old debt would matter much.

jesstach

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Re: Bank Account vs. Prepaid Debit Card for Everyday Transactions
« Reply #7 on: December 16, 2013, 12:01:11 PM »
Glad to hear that you're going to give Bluebird a shot. I've used it a few times and never had a problem with it. Although, they are currently upgrading their website and there have been a few bugs with bill pay lately. They also have a mobile app that should work if their website is down. I think it will work well for your situation and will save you some money on fees.