How can pre-paid cards help with financial management?

People who struggle to manage their money could find that pre-paid cards offer a simple and easy solution that can help them get back on track.

Pre-paid cards can be an excellent tool to help teach budgeting skills, as well as to ensure that important payments are not missed due to bad financial management.

As their name suggests, pre-paid cards are charged up with a specified amount of money each month.

The account attached to a pre-paid card works in much the same way as a standard current account in that a salary or other earnings can be paid in automatically and direct debits and standing orders can be set up to pay bills and other outgoings.

Account holders can decide how much money they would like to be put on their pre-paid card each month - whether this is all that is left after bills have been paid or simply a proportion of the remainder.

Once a pre-paid card has money on it, it can be used in the same way as a regular debit card to pay for transactions in shops and to withdraw money from cash machines.

Before taking out a pre-paid account, it is worth checking what the charges are to carry out certain transactions, as you may find you are charged for using cash machines both in the UK and abroad, as well as for other services such as replacement cards.

One of the major advantages of a pre-paid card is that you will not be able to spend more money than you have in your account, so you will never have to worry about the possibility of going overdrawn.

You can also vary the amount of money transferred to the card each month using online or telephone banking, so if you need some extra cash on your card quickly, you should not find it too difficult to make the transfer.

In addition, you will be able pay money into your account at any time by visiting a branch of the bank with which your account is associated or using one of the many Payzone outlets around the country.

This means that you still have control of your finances, but will have some extra help when it comes to sticking to your budget and will not be able to be tempted to spend money that you need to save to cover bills.

Another reason that pre-paid cards are popular is that you do not need to undergo the same credit checks required to open a standard current account.

This means that anyone can set up a pre-paid account, regardless of their financial history, which could provide you with the perfect opportunity to get on top of your money and manage your outgoings effectively.

As you are able to request more than one pre-paid card with each account, parents could find that this is a useful device for paying allowances to children, for example, and keeping track of their spending.

Pre-paid cards use a chip and PIN system like other debit and credit cards, so you can rest assured that your transactions will be secure.

Providers of such accounts should also be regulated by the Financial Services Authority, which will give you and your money added protection. It is definitely worth checking that this is the case before setting up an account.

While pre-paid accounts are not suitable for everyone, there are a number of advantages to managing your money in this way, especially if you have difficulty sticking to a budget.

Using such a tool for your financial management means you will be able to see clearly each month how much money you have to spend on yourself, without having to constantly worry about whether bills have been paid on time.

Of course, a certain amount of discipline is required, but it can definitely be an excellent first step towards effective financial management.

If you think that you could benefit from taking out a pre-paid account, do some research into the various providers of such services in the UK. It is always worth talking to the bank as well to ensure that this really is the best option to help you stick to your budget.

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2011-04-13 13:07:52 © Moneyextra.com