Since 2005, the popularity of an alternative to classic banking has emerged: the prepaid debit card. Many individuals have decided to drop their regular bank account and go with this option. Is it really worth it? Do you really save on fees? Is it that convenient? And more importantly, should you switch your bank account to a prepaid debit card?

A recent study from Breton Woods made an interesting comparison between the 2 banking options. It shows that in some cases, the prepaid debit card can turn out to be a great solution. In fact, they even claimed that “consumers who opt to use a network branded prepaid card could save 35-70% on fees as compared to low balance checking and debit accounts, making prepaid cards a far more valuable, cost-effective financial tool for many.”

The comparison reveals that:

• A typical consumer with a low balance checking account can expect to pay $200 to $350 annually in the form of overdraft fees, ATM fees, and minimum balance fees.
• Consumers using a system of money orders, check cashing and bill payment services can pay anywhere between $167 to $312 annually in various fees.
• A consumer using prepaid debit cards without direct deposit can pay $215 to $320 in annual fees.
• Users of prepaid debit card with direct deposit may pay between $108 to $207 in annual fees. For customers in the same income zone and usage patterns, this option may save a consumer about $96 to $146 over a basic checking account.

However, I would say that if you tend to manage your bank account responsibly, it will be cheaper for you to use a regular account. While the prepaid debit cards are easy to use and can help you manage your budget (since you can’t spend more than what is on it), the overall fees are quite high compared to a regular checking account (keeping in mind that you should avoid overdraft and NSF fees).

Which option is best for you?

If you want to make an educated choice, I suggest you take the time to read the Breton Woods study on this topic. Personally, I still prefer the regular checking account as it is easier for me to manage (I don’t have to load my card with money every month) and I pay minimal fees (because I always meet the minimum balance requirement).  Lastly, I should mention that the manner by which you manage your budget / cashflow could influence which choice is best for you.

We had a fun and busy weekend. We went to celebrate family friends’ 30th anniversary. All in all it went well, but while driving up, we hit a snag. We’re about an hour and a half from our destination and decided to take a quick break and grab a snack. I ask my husband to pass me my purse, but he didn’t see it. After looking around for 10 minutes, we realize it’s not with us!

Report your debit card as soon as you realize it's missing or stolen.

Reporting My Missing Debit Cards

I was 99% sure it was still inside the apartment, but I didn’t want to take a chance for that 1%.  I immediately called the banks to freeze my cards until I can either verify they are at the apartment or stolen. I called Wachovia first. I was on hold hold a quite a bit, but when I did get my customer service representative, she was sweet. I explained my situation and she placed a hold/freeze on my debit card.

I then called ING Direct to do the same thing. They told me that was not possible and besides calling in every day to check, I could have a new one sent to me in approximately 5 business days. Since this was a short trip (2 days), I decided not to get a new card.

Liability for Debit Cards

The Federal Trade Commission(1-877-FTC-HELP) notes that credit card liability is $50, but it can be more for debit card, depending on how quickly you report it stolen.

…if you report the loss within two business days after you realize your card is missing, you will not be responsible for more than $50 for unauthorized use. However, if you don’t report the loss within two business days after you discover the loss, you could lose up to $500 because of an unauthorized transfer. You also risk unlimited loss if you fail to report an unauthorized transfer within 60 days after your bank statement containing unauthorized use is mailed to you.

I think most people will fall in the first or second category.  I can’t imagine too many people waiting more than 60 days, unless they are overseas and left their debit card at home.

Found my Purse!

I came home and it was right on the counter in the kitchen. Relieved, I called my bank to take the hold off my check card. I didn’t have to wait long (3 minutes) and my customer service representative was pleasant. He told me that they need to verify my identity before unfreezing the card. I went ahead and answered their security questions.

Unfreezing the Hold with Security Questions

The security questions were from my credit report. I found a couple questions bad to ask such as the birth month of a person since both my father and brother share the same first and last name. Which do I pick? It also had an incorrect address listed, but since I knew of this mistake, I have the the ‘right’ answer.

After verifying who I was and unfreezing my check card, the customer service representative asked if I wanted a Wachovia credit card. I politely declined, so he thanked me for being a customer.

Have you lost or had your check card stolen? Did your bank or credit union work with you?

Photo Credit: liewcf

Last week week I signed up for Wachovia’s Way2 Save  program to try and stow away some money at a higher rate than ING Direct.  I can save some money at 5% APY and receive a bonus from the bank on my anniversary day. It’s been saving mode here at home and I want to sock away as much as possible. My temporary job is over and we managed to deposit $1,650 away in our joint savings.

We’re proud of it, but we’re hoping to build it up more by year’s end.

What are the Way2Save?

There are three ways to get money into my Way2Save account:

• Use my Wachovia Check Card for purchases
• Use Wachovia’s Online Bill Pay
• Make automatic payments

Wachovia moves $1 from your checking to your savings whenever you use the bill payment service and use the debit card. You can also set up an automatic monthly deposit up to $100.

Since I use online bill pay, I thought this would be an easy way for me to deposit money into the account. If I set up some automatic transfers that would help build up the emergency fund savings just a little bit more.

What’s a Good Way2Save?

Of course, I’m just as I’m feeling good about joining this program, I catch a tweet from Consumerist today about Wachovia’s program. Someone used the basic rules to see if they could deposit more by sending several small payments. Instead it backfired and she ended up with $5,000  to pay.

Well, I’m not going to focus on using bill pay for deposits. I’ll stick with automatic deposits.

Photo Credit: Neubie

I was reading an article in the NY Times last and saw something that will affect us. Some of the larger banks announced that they are lowering their overdraft fees. This is something we’ll keep in mind as we bank with Wachovia (bought by Wells Fargo).

Why are the banks lowering their overdraft fees?

The moves come as lawmakers and regulators in Washington push proposals to reform what critics say are excessive charges of which consumers are unaware. The penalties, known as overdraft fees, bring the banking industry tens of billions of dollars in revenue annually.

What does this mean for you?

Chase and Wells Fargo will cancel fees for accounts overdrawn by $5 or less, according to separate statements. Bank of America will end fees on accounts that are short $10 or less, it said in a statement.

Try online banks as a alternative or supplement

For some people this is a bit of too little, too late. If you want to lower fees and better customer service, look at some of the online banks, like ING Direct. They can offer features that can be a huge improvement over some brick and mortar banks.

Here what I personally like about ING’s Electric Orange checking account:

• No fees. There’s no minimum balance on the account.
• If the money is not in the account, they won’t pay the bill.
• Earn real interest.

Even if you don’t use it as your main bank, you may have your savings account over there to test the waters. That’s what we did when we tried ING Direct out.

There are several other high interest savings accounts, if you are looking for other options. Don’t forget to check out their current rates. Just open an account somewhere that you feel comfortable, won’t get feed for everything, and can grow your money.

• HSBC Direct
• Emigrant Direct
• Citibank Direct
• Capital One

What do you think? Will lower overdraft fees affect your choice in banking?

If you’re looking for options on your bank accounts, I want to point out that we keep our joint checking account with ING Direct and we really enjoy it.

They don’t have the highest rates, but their customer service has been great for us, so we’re staying with them for now.

Have your money grow instead of getting fees.

ING Direct: What We Like About the Bank

Here what I personally like about ING’s Electric Orange checking account:

• No fees. There’s no minimum balance on the account.
• If the money is not in the account, they won’t pay the bill. This sounds like common sense. No money=no payments. Bank of America will just pay your bill and then fee you, which in turn can create more transaction fees. A relative actually had a horrible case when her monthly salary didn’t come in as scheduled (HR error) and Bank of America went ahead and charged her fees of hundreds of dollars.She explained to the bank what they error was, but to no avail. Fortunately, she went to her job’s Human Resource Department and got reimbursed for this problem.
• Earn real interest. Unlike Bank of America, where our money was growing very,very slowly (a few cents every three months), ING had us earning a few extra dollars a month. With the rates lower now, it’s not getting higher, but much better than our old bank.
  

  How our old bank treated our savings.

Ok, here’s the gist of the savings account benefits:

The Orange Savings Account

• Better rate than my brick and mortar bank – no minimum balance required, a nice bonus.
• No fees – I don’t have to worry about low balance fees.
• 24-hour access to your account – You can login and transfer money quickly and easily.
• FDIC-insured – It’s just like any other FDIC insured bank, your protection is up to $250,000.

If you’re interested, I can email you a referral link. If you don’t have $250, please still sign up for asavings account. It’s a great deal and you deserve to see your money gain interest.

High Interest Checking and Savings Accoounts to Check Out

There are several other high interest savings accounts, if you are looking for other options. Don’t forget to check out their current rates.

• HSBC Direct
• Emigrant Direct
• Citibank Direct
• Capital One

Just open an account somewhere that you feel comfortable and grow your money.

Your Thoughts

Have you switched your bank accounts? Why did you choose it? What do you like about it? Do you have any tips on switching?

Photo Credit: TheAlieness GiselaGiardino²³ and colin.brown

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