Follow the conversation between sisters as they discuss prepaid debit cards and checking accounts in this episode of Personal Finance 101 Chats.
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Maliyah: Hey Aisha, do you have a second to help me figure out what to do about my paycheck?
Aisha: Heh, you can just hand it right over to me, little sister.
Aisha: Seriously, of course I have a second for you… whassup?
Maliyah: Well, I figured since you're studying accounting at college, maybe you could give me advice?
Aisha: I'll do my best…
Maliyah: I usually take my paychecks to the check cashing place.
Aisha: The check cashing place charges a ridiculous fee, so you can't keep doing that.
Maliyah: Yah! It's horrible! But I like actually having the money from my check!
Aisha: Well, if you get your cash stolen, you're out of luck!
Maliyah: So my friend Tiffany from work said she just has her pay loaded directly onto a prepaid debit card. I'm wondering if I should just do that, too.
Maliyah: But, I'm concerned that I won't ever get to SEE my money!
Aisha: Ok, so prepaid cards…let's see if we can think of some of the good things about them. For starters, you won't have to fork over the check-cashing fee.
Maliyah: Yeah, that's good! Tiffany said having the prepaid card is great for being able to pay her bills and shop online.
Aisha: $hopping isn't something you need any help with, last time I checked.
Aisha: Another plus is that if you lose your prepaid card or it gets stolen, you might be protected from losing all the money. That will depend on the rules of the card issuer.
Maliyah: With the prepaid card I won't have to hassle with getting a bank account, either.
Aisha: We'll talk more about that in a minute…but let's think of some of the problems you could run into with the prepaid card, like the fact that some of them also have MAJOR high fees.
Maliyah: Wait! Fees for what??? I thought they were just free to use?
Aisha: Duh. Prepaid cards have all kinda fees. Fees for activating them, for using ATMs, for putting more money on them, for NOT using them. Heh, some of the prepaid cards even have fees for CANCELING them!
Maliyah: I might as well just keep going to the check cashing place with all those fees!
Maliyah: Ugh. Why is this all so hard? Just tell me the smartest thing to do.
Aisha: Ok, let's go back to the bank account thing. Why are you so against getting a bank account?
Maliyah: I dunno. Seems hard? I've never really been to a bank, but I've heard it's a real hassle.
Aisha: Getting a student checking account at a bank or credit union is easy! It is the first step toward building good credit for major stuff you might want to buy down the road. You should think about it.
Maliyah: Maybe. But what should I do RIGHT NOW?
Aisha: Ok, why don't you ask your boss at work what kind of prepaid cards they use for payroll. Then you can look up the fees for that card online.
Aisha: Next I'd go to the credit union down the street and ask them if they have a student checking account, and if so, what sorts of minimum balance and fees are associated with it.
Aisha: Find out that stuff and let's chat again to figure out what's best for you.
ONE WEEK LATER...
Maliyah: Hey! I found out a bunch of information, do you have a second?
Aisha: Yep! Did you find out what the fees are for the prepaid card?
Maliyah: yah, since the money is direct deposited from my work, there's no fee there, but it's $2.00 each time I use an ATM, plus whatever that ATM charges!
Maliyah: That means any time I need to get money off my card it's going to cost me between $4 and $5! That's as much as it costs me to cash my whole paycheck at the check cashing place!
Aisha: eeek! Maybe not such a good deal. Ok, so… did you find out about an account at the credit union?
Maliyah: I did! OMG, it's so easy! They have a free checking account for people under age 25 as long as you sign up for direct deposit and get your statements emailed instead of paper mailed.
Maliyah: Seriously? Who gets paper mail???
Aisha: And what about fees?
Maliyah: So, if you sign up for overdraft protection, it's a $35 fee each time you spend more money than is in your account. BUT! Since this is a "starter account", they will let you have one free "ooops" every six months.
Aisha: Nice! Wish my bank did that! So… whatcha gonna do?
Maliyah: You're not the only smarty pants in this family. I already opened my free checking account and am going to log on to my account now to see if my direct deposit went through yet! TTYL
Aisha: K bye!
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