Most of us feel the same way about budgeting as we do about dieting. We know we should be doing it, but often don’t get around to it, or stick to it. Budgeting can be hard work, especially when you aren’t sure which tools you should be using to help achieve your goals. There’s no shortage of budgeting tools or personal finance programmes, however prepaid cards can help consumers before they veer off track.

What is a prepaid card?

A prepaid card is a payment card that is loaded with money by you or someone else. It looks like any normal credit or debit card, with a card number, signature strip and company branding however, unlike credit cards which provide you with a line of credit, you can’t borrow money with a prepaid card – you can only spend the money that you have loaded onto it. Simply put, it’s a safe way of storing money in a secure account that requires a unique pin number. They offer a practical solution to safeguard you against overspending, and are a great place to load money onto when saving for a specific event, or purpose. Think of it as a piggy bank in the shape of a credit card.

How do they work?

Most prepaid cards are sold off the shelf, with no need for credit checks or an actual bank account, and activation is quick and easy. They are usually available to anyone over the age of 16, although children under 16 may also utilise the cards with consent from parents or guardians. Once the user has loaded money onto the card they can start spending immediately. In terms of the fees associated with prepaid cards, they are usually a lot less than those of a cheque or credit card account.

Here are some benefits of using a prepaid card:

Budgeting for holidays

Instead of worrying about how you’re going to afford your dream holiday rather deposit a set amount into your prepaid card each month. By the time your holiday comes around, you’ll be overjoyed that it’s already paid for. You can even take your card with you on holiday, load a certain amount of money into it and only spend what’s on the card. This will help you avoid overspending. Another benefit it that you don’t even have to worry about having to pay off your credit card once you return home.

Limit spending by loading set amounts for specific purposes

For example, if you want to curb grocery spend, load a certain amount onto your card and make sure that it lasts until your next payday. The same applies for monthly restaurant or clothing purchases. Avoiding having your card declined because you have exceeded your limit can be a powerful incentive to stick to your good intentions.

Protecting an elderly or disabled loved one

The elderly and disabled are more vulnerable to fraudulent activity, so access to credit cards and large balances on cheque accounts is dangerous. With a prepaid card you can frequently load enough funds for expected expenses so that your loved one holds onto a level of independence while you regularly track spending.

Teaching your children how to budget

Prepaid cards are great for teaching kids about budgeting. Parents can view detailed transaction reports online so they can track where their children have spent their money. Parents can also load their children’s spending money onto the card, and if the card is lost or stolen, all you need to do is get the card stopped. This also helps prevent loss of money.

More and more people globally are turning to prepaid cards. A February 2014 report by the Pew Charitable Trusts states that U.S. consumers loaded more than $64 billion onto general purpose reloadable (GPR) prepaid cards in 2012, up from almost $57 billion the previous year. And nearly 75% of prepaid users are under 50 years old.