Finances FYI Presented by JPMorgan Chase
Taking control of your finances doesn’t have to involve big changes or a complete overhaul.
Using specialty bank accounts or prepaid cards to manage expenses, such as recurring payments, gift cards, and seasonal subscriptions, can make it easier to save wisely and spend purposefully.
Specialty Bank Accounts
One of the best ways to monitor your spending is to use specialty bank accounts for anticipated expenses.
Setting Up the Accounts
Online savings accounts often provide more flexibility than those connected to traditional brick-and-mortar financial institutions. These accounts let you set a number of “goals,” “accounts,” or “pots” that focus on a specific savings goal or spending plan.
To set up a new account, first check whether your existing credit cards or banks offer these diverse online options. If not, try Capital One 360 and SmartyPig as two great options to start.
Benefits of Specialty Accounts
Online savings accounts make it easy to set up automatic transfers to each goal on a regular basis. You can direct the exact amount of money you need to the account and know that it’s earmarked for a single purpose.
Another benefit is the separation from your primary checking account. By keeping the funds separate, you’ll take advantage of the “out of sight, out of mind” adage. It’s far less tempting to spend money you don’t see.
Finally, specialty accounts can help you prioritize your spending. Going through the setup process and designating transfers requires you to think multiple times about whether this financial goal is worth the effort.
Drawbacks of These Accounts
One of the biggest drawbacks to most specialty accounts is the monthly withdrawal limits.
Since they are primarily savings accounts, federal regulations limit monthly withdrawals to six per month. In some cases, the six applies to each goal or pot in your account. In others, the six applies to anything in the account. It’s crucial to check which rules apply to yours and plan accordingly.
Another drawback is the lack of physical location. If your internet service goes down or there are online security glitches, your access will be restricted temporarily.
Lastly, if your account is “savings,” you’ll need to add an intermediate step to the payment process by first transferring funds to your primary checking account. With automated systems, this downside isn’t much of a hassle, but it can be cumbersome during the setup process.
Tips for Using Specialty Accounts
- Only set up accounts for goals that you’ve already included in your monthly budget.
- Log in to check balances regularly to ensure your automatic transfers are working.
- Read the fine print carefully regarding withdrawal limits, balance minimums, and overdraft fees.
- Shop around for accounts that offer the best perks (interest rates, free 1-day transfers, community partnerships, or local ATM’s are common options).
Prepaid Cards
Another great option for taking charge of spending is to use prepaid cards for recurring payments, savings goals, or seasonal subscriptions.
Choosing the Cards
Purchasing prepaid cards is easy. They’re available in most grocery stores and online. You also have dozens to choose from, including specific cards for individual retailers and generic Visa or Mastercard options. Consider the following when purchasing:
- Exactly which items will the card pay for?
- Can you earn perks by purchasing at a specific store? (Cash back rewards, fuel points, loyalty cash)
- When do the cards expire?
Benefits of Prepaid Cards
The biggest benefit of using prepaid cards is their strict limits. If you purchase $50 in Amazon gift cards, you can only spend $50 at Amazon. By restricting yourself to a pre-determined amount, you’re far less likely to succumb to impulse shopping.
Prepaid cards also help spread spending between slower and busier months. If you have subscriptions that come up every summer, purchasing prepaid cards throughout the year can spread that expense into more manageable chunks.
Using prepaid cards to shop online can also improve digital financial safety. Without putting your personal credit card information into dozens of websites, you’ll reduce the risk of fraud and theft.
Drawbacks of These Cards
The biggest downside to prepaid cards is their rigidity. You can only spend that amount at that retailer. If your plans change, you’ll have to do more work to adjust the balances.
Similarly, you don’t have a backup for the card if it gets lost. Funds aren’t linked to a bank or physical location. Keeping track of multiple prepaid cards can also be a hassle.
Tips for Using Prepaid Cards
- Write down card numbers and PINs in a safe location immediately after your purchase.
- Keep a note or spreadsheet handy that lists which card covers which service.
- Register the cards online to track balances.
Both specialty bank accounts and prepaid cards can make it easier than ever to take charge of your spending.
Finances FYI is presented by JPMorgan Chase. JPMorgan Chase is making a $30 billion commitment over the next five years to address some of the largest drivers of the racial wealth divide.
