On low-fee prepaid cards vs. “free” bank accounts

Though free checking accounts haven’t always been around, I’ve never formally paid for a checking account in my life, and I’m willing to bet that a lot of you haven’t either.

I’ve just kind of accepted that checking accounts should be free and have wondered why people would pay a small monthly fee for some other kind of option (like a prepaid type of card.)

But a few weeks ago, this quote from FamZoo founder Bill Dwight made me rethink this idea.

And then I thought of a long-forgotten incident years and years ago, when Mr. FG and I accidentally overdrew our “free” checking account.

On a Friday afternoon.

I remembered how (conveniently enough!), my bank wouldn’t credit any deposits from my savings to my checking over the weekend.

And how (extra conveniently!), they still DID keep taking transactions that trickled in all weekend long, dinging us with $35 fees every time.

By the weekend’s end, we’d piled up a good $200 in fees, which at that point in our lives was a small fortune.

Suddenly our free checking account wasn’t so free anymore, and obviously, this is one of the ways that the bank makes money while still giving away “free” checking accounts.

Now that we have more of a financial cushion, we’d be able to pay such a fee more easily. But the irony is that we are also far less likely to incur such a fee precisely BECAUSE we have more cushion.

It’s like Bill Dwight said: this system means that people with less money end up funding the free accounts for people with more money.

(This is not to misplace blame for my overdrawn account-it was indeed my own fault! But a system that lets you keep spending while not accepting deposits is pretty broken.)

Anyway, this has made me realize the value of a prepaid card system, especially for young people who are just starting out, with little money and not a lot of financial experience.

I’ll tell you more about FamZoo in another post (we’ve been using it with our kiddos), but today, I’m gonna share about Kaiku, which would be a great fit for older teens/young adults.

What’s Kaiku? And how much does it cost?

Kaiku is alternative online banking system, which operates on a prepaid Visa card.

Kaiku just charges a $3/month fee for their services, although if you direct deposit $750/month, even that fee is waived.

Also, if you use an out-of-network ATM, then there’s a $1.45 charge, but obviously, that can be avoided too, if you use an in-network ATM.

And that’s it for fees.   You can’t overdraw the card or rack up debt or pay interest, which means that this card keeps you from spending money you don’t have.

If it’s not there, you can’t spend it. The end.

Yay!

It’s super easy to use-it’s a Visa, and mine has been accepted everywhere I’ve swiped it.

Loading the Kaiku card

You can deposit checks for free using an iPhone or Android device, and you can also deposit money from Paypal or Amazon.

In addition, there’s an option to load the card with a transfer from an existing bank account (handy if you’re a parent loading a card for one of your kids).

Spending Tracking

Seeing what you’re spending on non-essentials is key in keeping those expenses under control, so the   Kaiku app has a Funds-ometer feature that tracks spending and compares it to the user’s average over the past 60 days in non-essential categories, like eating out, bars and entertainment.

Bill Pay and Friend Pay

With a Kaiku account, you can pay recurring bills (such as electric bills), a classic checking account feature.

And if other friends have Kaiku cards, you can transfer any money you owe straight to their card.

While a traditional checking account/debit card is certainly a better option for a young person than a credit card, I really think that this flat-fee prepaid idea is even better.   It’s got all of the upsides of a checking account without the downsides, and I think it’s such a great idea, especially for teens and college students.

You can check out Kaiku on their website, and read more about the company here.

And if you’re ready to get signed up, just click here to get started!

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So. I’m curious to hear your thoughts on this.   Are you a fan of free checking? And what do you think of the flat-fee prepaid idea?

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Disclosure: Kaiku sent me a pre-paid, pre-loaded card to try out so that I could do a review and share Kaiku with all of you.   None of the links in this post are affiliate links.