Tell me if you can relate to this: a year ago, I was drowning in non-sufficient funds fees, or the dreaded NSF fees.
I was so over it!!
I was living paycheck to paycheck and living outside my means. I lived outside my means because the credit union I belonged to allowed me to -- for a price. And the price was the NSF fee, to the tune of $29 a pop.
I learned I could go just about anywhere and even if I didn't have enough money in the bank I could swipe the card and just pay a really ridiculous fee for it later.
Example #1: I don't have enough to get everything on my grocery list. Well, I worked some overtime, I'll just pay the NSF fee and make up for it next paycheck.And so the cycle perpetuated itself.
Example #2: Hubby is sick and we have to go to the urgent care center. I don't quite have enough to cover the cost, but oh well! What's another $30 on top of the $85 doctor bill?
I remember a time when banks declined your debit card at the point of sale. If you were trying to buy something without having enough money in the bank, you were denied. It was embarrassing. You're standing in line at the grocery store or Walmart, you swipe your card hoping against hope this purchase will go through ... and then you see the dreaded "CARD DECLINED" show up on the card swipe display. Everybody standing behind you gets to watch as you walk away, leaving behind everything you carried up to the register. It's mortifying.
Anybody else remember those days?
Until the banks figured out how to turn that embarrassment into a way to make themselves some money.
Fast-forward to where I was a year ago.
Clearly, I was someone who needed intervention. I would have gladly received it. I often went into the credit union to pay my landlord (we used the same credit union) and expected them to pull me aside and say, "We noticed you have a little problem." I would have totally agreed with them. "Yes," I would have said, "I do have a problem. What can I do about it?"
I knew I could swipe that card, even if I was $100 in the red, and those transactions would go through.
I also knew it was a downward spiral that I had no idea how to stop.
You know what stopped me?
I stopped me.
NOT the credit union.
The beginning of the endIt got to a point where my checking account was more than $300 overdrawn. Savings? Pfft. What savings?? (That misery is a whole 'nother blog post.) I logged on to check my account one day to get the exact amount I was overdrawn, with the intention of walking into the branch to discuss how I could pay it off. To my horror I saw the amount had increased dramatically -- it was over $500 now. ALL of the extra overage came from decline fees. I had a couple of monthly subscriptions trying to go through, one for $6, one for $9, and one for $4. Nothing I couldn't live without, one was for anime and one was a music streaming subscription. I did not realize the payments were trying to go through and getting declined ... and each time it was getting declined the credit union charged me $30!!!
I was incredulous. To say the least. I also felt betrayed. Did they not see I was already deeply in trouble with my account? I called them to see if they could reverse those charges. I explained (something I felt I shouldn't have had to do since it seemed so painfully obvious!) that I was already having trouble paying the previous overdrawn amount, could they perhaps work with me if I cancel my subscriptions?
(Not to mention ... $6 per month!! $6 per month!!!! They CONTINUED charging $30 each time a $6 charge was declined. How did they honestly think that made sense for an account that was already so badly overdrawn??? I mean I get it, the credit unions and banks have a system set up and the system was just doing its job. And I know they have rules, and the rules say if you try to charge something when you're overdrawn the credit union charges a fee. But it seemed to me someone, somewhere along the way should have seen it and red-flagged my account or something, sent me an angry letter, given me an angry phone call. SOMEthing. But no.)
When I called to speak to someone about it I was told to apply for a "Signature Loan" or otherwise come up with the $580 or the account would be closed permanently in a week (the end of the month).
Their solution for me was to apply for a loan. Me, who clearly has trouble paying money back! I thought it was a joke. I waited for the person on the other end to start laughing and then say, "Just kidding!!! We see you're in a world of trouble and we'd like to offer you an alternative in the form of education. Are you interested?"
But that is not the conversation that happened that day.
They weren't willing to work with me. They offered no alternatives. I felt utterly hopeless and betrayed. I thought, okay, so I haven't been the most brilliant client, but they have to see I've been continuously employed by the same company for nearly a decade, because I've had all my paychecks direct-deposited to them all this time. Doesn't that count for something? Obviously I can hold down a job.
My response to the lady on the phone was, "Well I am unable to come up with that money right now. Thank you for letting me know ... " I hung up from that phone call and despair settled in like blue-green algae on a Florida beach in July.
I knew about prepaid debit cards because I saw brochures where I got my payday loans (another vicious cycle, yes; one I got out of and will tell you all about that in a later post). I took one of those brochures home with me to take a closer look.
Okay, before I lose you completely, let me ask you this: have you looked at prepaid debit cards recently? No, really. Because I sure hadn't. Last thing I knew about them was they were sketchy at best because they usually came with a bunch of fees.
Prepaid debit cards are different from secured credit cards, although the mechanic is essentially the same: you load the card with money and then you can use it just like a bank debit or credit card. With a prepaid debit card you don't improve your credit score (you don't make it worse either; the prepaid debit card has no bearing on your credit score one way or another), whereas the secured credit card does.
I was at the point where I could care less about my credit. Finding out that information about my credit union checking account was like getting punched in the stomach. I have never in my entire life, since I've had checking accounts, ever let my banking habits get to this point. I've had a checking account open for more than 20 years. It felt like I hit rock bottom.
So, prepaid debit cards? Sure! Why not? How bad can it be? At first blush it appeared to be not so bad.
And I took a closer look.
And it turned out to be the greatest single financial decision I'd made in a long, long time.
Many different types of cards, rewardsIt turns out there are a LOT of prepaid cards out there. After researching a few that stood out to me, I ultimately decided to go with NetSpend and I haven't looked back.
Prepaid debit cards DO decline you at the point-of-sale, just like the good ol' days! Well, for me it basically forced me to live within my means.
But that's not all!
I discovered some also come with cash back rewards.
And a savings account with a 5.00% APY interest rate!
And web banking including a budgeting tool!
And I can design my own card!
And most importantly -- your money is FDIC-insured. Which means, it's basically a bank account, but without paper checks (and really, who still uses those things, anyway?).
And it turns out -- in the case of the card I ultimately wound up going with -- they do give you a tiny cushion in case you spend more than you have: $10 to be exact. And the fee? $15, with a maximum of 3 charges per month!!
I had to read that part again.
So I'll never pay more than $45 per month in overdraft transactions???
Full disclosure: I do pay a monthly fee of $5 to use this card.
But before I was paying $29 per transaction every time I used the credit union card when I was overdrawn. With this prepaid debit card I will NEVER be overdrawn, at least not more than $10!
And a year later, I've managed to avoid overdraft fees altogether!!
A true success storyA year later and I've finally gotten ahead on my monthly bills. I pay them early or on time now. No more robbing Peter to pay Paul! I still don't have a savings but I'm on firm footing now to get one going.
Sorry if this sounds like a commercial but I love using my NetSpend Prepaid Debit Card.
So what other cards are out there? And which ones would I recommend?
I can't tell you which one to use, if you're thinking about getting one. If your bank offers their own prepaid debit card, I'd go with that option first. Otherwise my top 3 picks are:
- The American Express Bluebird card is a great one, and got high marks on this NerdWallet review of prepaid debit cards;
- The Mango card, which scored #1 out of a review of 10 such cards on this website.
- And finally, the NetSpend Prepaid Debit Card which I use.
EpilogueI still go in to the credit union where I used to have an account to pay rent to my landlord. Occasionally they'll ask me if I'm a member. I simply say, "No". I don't volunteer any more information that that. I have never paid back what I owe and I don't intend to. Just because it's legal for them to charge those fees doesn't make it right! Many articles I read call it "legal extortion". However, I have noticed they now offer their own prepaid debit card. Oh, the irony! In fact, I'm noticing a lot of traditional banks are offering them nowadays, because there are so many people out there like me who really benefit from using them, and who need them.
Ultimately, you need to do your research as I did before making a final decision. The prepaid debit card is certainly not for everyone. I have no problem paying $5 per month to use the card. I'm living within my means for the first time in years, and you can't put a price tag on the peace of mind that brings.