Receive regular updates via email

Considerations when using a prepaid card

If you want to have the convenience of a credit card, but you can’t qualify for a regular credit card, one option is a prepaid card, sometimes known as a prepaid debit card or a stored value card. The concept is the same. It looks like a credit card, and you can use it up to some limit. Like an ATM card, you can use up to a specific amount. Depending on your bank, you may also have the ability to go over the limit on an ATM card, and maybe pay some overdraft fees. However, with a prepaid card, once you reach the limit, you can’t spend any more.

You can can get a prepaid card that looks just like a credit card, including having a Visa or MasterCard logo. They may look like credit cards, but there are a few things about them that are different, and that my make them attractive or unattractive depending on your situation.

Key things to know about prepaid cards

Whether you will want to use a prepaid card will depend on your situation. Before you use one, here are a few things to consider:

  • No bills to deal with later since you are using money you already have.
  • You don’t need a bank account to get one.
  • Your credit history doesn’t matter, you just need to have cash.
  • There is usually a fee to activate the card or to add money to it.
  • You can use it instead of cash.
  • If it is lost or stolen, it likely can’t be canceled.
  • They are accepted at most places that accept credit cards.
  • You have to keep track of how much is left on the card.

One ideal use of this kind of financial instrument is as a reloadable credit card for students, especially if the student doesn’t have experience dealing with credit cards or ATM cards, or maybe has done so in the past but has shown poor decision making.

For this kind of student, especially someone like a college freshman who is spending time away from home for the first time, a prepaid card can give a young person the convenience of a credit card with responsibility of keeping track of finances, while limiting the financial damage if they exercise poor judgment and self control.

Financial literacy impacts decision making

Research by the US Federal Trade Commission shows that financial education affects financial decision-making. Failure to plan for retirement, lack of participation in the stock market, and poor borrowing behavior can all be linked to ignorance of basic financial concepts.

Some of these findings, from the 2008 paper Financial Literacy: An Essential Tool for Informed Consumer Choice? by Annamaria Lusardi, may seem quite obvious at first glance. For example, the author points out that those who demonstrate even a basic understanding of relevant financial topics are much more likely to have planned for retirement. These are not sophisticated topics, but basic things such as knowledge of interest compounding and the ability to perform simple mathematical calculations . Skills like these were shown to be among the strongest predictors of successful retirement planning.

To appeal to the average person, who may not have had a lot of prior exposure to financial topics or investment experience, the study suggest a social or even a psychological approach to financial education, for example exploiting “teachable moments” like the beginning of a new job, in order to get a person to think about taking action when their minds are open to new ideas about how financial decisions may affect their lives.

While the points raised by this study are reasonable, the challenge faced by society, even wealthy countries, is vast. Since the late 1980s when there were significant changes in laws regarding retirement planning, companies were much more free to move from traditional defined benefit plans like pensions to defined contribution plans like 401K plans that shift the responsibility of planning from the corporation to the individual.

While individuals and organizations with high levels of financial sophistication, such as firms specializing in industry specific areas such as chemicals m&a experts can easily manage rather exotic financial decisions, the average person has a much more difficult situation. Financial instruments have become increasingly complex and individuals are constantly being bombarded by the investment industry with new and financial products. However, most individuals are not well equipped to make financial decisions.

The study showed that most individuals cannot perform simple calculations and lack knowledge of basic financial concepts. Knowledge of more complex concepts, such as the difference between bonds and stocks, how mutual funds, and how to estimate the value of an asset is even rarer. Financial illiteracy is widespread among the general population, and particularly evident in some demographic groups that happen to also be overrepresented among the poor and struggling working class, such as women, African-Americans, Hispanics, and those with low levels of formal education.

Software programs as outsourcing alternatives

The Internet makes outsourcing of business functions, especially back office type functions like accounting and word processing, especially attractive for companies in high-wage regions like the USA and western Europe, to outsource to low-wage countries where trained professionals can do a competent job.

Outsourcing may be a great idea for individual companies, but on a national level this kind of activity may cost jobs in America and other high-wage countries. Some business owners, large and small alike, are seeing the harm this trend may cause in their home country and as a result, have begun taking actions that lower their back office costs, but helps to keep jobs in America.

The key to saving a lot of US jobs isn’t people, but rather software. Three important pieces of software, all created in America, play an outsize role in keeping some jobs from being shipped overseas.

The Microsoft Office Collection
Arguably one of the most popular pieces of software to ever be invented, the Microsoft Office collection has found a comfortable home in the American business community. Even better, the collection was completely created by the all-American company—Microsoft—Bill Gates’s iconic, multi-billion dollar corporation.

Featuring well-known programs such as Word, Excel, and PowerPoint, the Microsoft Office collection is widely being in a variety of diverse business applications. For instance, a company memo can easily be created in Microsoft Word, while important monthly budget figures can be collected, sorted, and analyzed in Excel.

QuickBooks
The brainchild of Intuit, an American-based company headquartered in Mountain View, California, QuickBooks has proven itself to be an asset in the business world, allowing business owners to track their sales and expenses, take the hassle out of taxes, and act as an overall organizational tool for finances.

Aside from organizing finances, QuickBooks has also gained a reputation for being superior in managing payroll and inventory. As most business owners know, running a business is filled with financial pitfalls and loopholes, all of which must be tracked and managed accordingly. Enter QuickBooks! Moreover, this essential piece of American-made payroll software is great for fending off the tax man at the end of the year.

TurboTax
Taking after its name, TurboTax is a tax program that has made end-of-the-year taxes much easier for everyone ranging from the small business owner to the individual consumer. Just like QuickBooks, TurboTax is also the creation of Intuit, meaning it is as American as they come.

Business owners know all too well the logistics involved at the end of the year when tax season arrives in full swing. However, tax time can be made much less stressful by using TurboTax, especially when you consider the fact that the financial info recorded in QuickBooks can easily be integrated into the TurboTax program. TurboTax is quickly becoming a staple amongst freelancers, small-business owners, and even CEOs.

The point here is that an American-owned business doesn’t have to look overseas for a low-cost alternative to completing necessary back office functions. In many cases, software that is made and maintained by American companies offer a viable alternative to sending money outside the country. Before deciding to outsource, a manager or business owner may first want to do a little research to see if a domestic software option is better and cheaper than sending work to a foreign country.