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High Interest Savings Accounts with Prepaid Cards

 

Prepaid accounts are typically considered a product for those with bad credit who are shut out of the banking system.  They often charge fees that customers with bank accounts are spared, the normal accounts pay no interest, and they often have the kind of inferior customer service that goes along with products designed, frankly, for lower class persons who are often themselves both more rude and more ignorant.  (Ask a credit card customer service agent who has done both types of cards if it is more stressful to answer calls for credit cards marketed to higher-class people with $20,000 credit lines or lower-class people with $500 secured credit lines.)  If bad financial decisions in the past have made you unable to open a bank account in the manner described the Best Deals with Banks article, then a prepaid account may be for you.  Forbes and Consumer Reports have useful material evaluating the various prepaid accounts available for those shut out of the banking system.

NetSpend

While prepaid accounts in general are usually not a good deal for those able to obtain normal free checking products with banks or credit unions, the high-interest saving accounts associated with some prepaid companies are a different matter–some of them offer extremely attractive rates of interest.  For example, NetSpend has a savings account that earns 5% interest up to $5,000.  (You can have up to three accounts and have up to $15,000 at 5% interest.)  There are no fees if you remain on the “pay as you go” plan, which is what I would recommend doing unless you actually plan on using the debit card.  There is a $5.95 account maintenance fee with this plan if you have no activity, but you can avoid that by having your bank automatically transfer a few dollars in a month and then pay a bill from Netspend (or even have the bank take the small amount back out again).  (You can view all the fees Netspend charges and what is free to do here.) You can set up an automatic deposit and withdrawal from the banks recommended here and the large majority of other banks.  All you need to do to get the 5% interest is link your bank to NetSpend, transfer money into the main Netspend account, and then transfer it into the NetSpend savings account on the NetSpend website.  Furthermore, if you open an account by clicking here, you will also get $20 after you deposit at least $40 in your account!  You can also have your friends and family open accounts, and each of you will get $20 using this link.  I would recommend doing as much as possible without speaking to NetSpend representatives, as they often do not know what they are doing, give you false information, or in other ways offer poor customer service.  Sometimes they do not even understand the English language very well.  however, the supervisors appear to be significantly more competent, for which I am thankful.  The NetSpend automated system makes it very difficult to even get a human being, so if you do need to call one I would recommend passing by the normal customer service number, (866) 387-7363, and calling (866) 930-9924 instead, where you will get a human being directly (thank you, gethuman.com!), even if not an especially competent one.  I prefer NetSpend to Mango Money (reviewed below) because NetSpend has no monthly account fees, while Mango has a $3 a month fee, and, at least so far, the customer service with NetSpend, although poor, has not been quite as bad as the horrible customer service with Mango Money.

Mango Money

At the time this article was written (March 2015), the Mango Money prepaid account offers a 6% interest rate savings account on balances of up to $5,000–and one can have up to three Mango savings accounts per household address, so a guaranteed 6% rate of savings on up to $15,000 is available for any family.  (You can only withdraw $2500 a day, so if you need to get your $5,000 out, you will need to space it out over two days.)  The Mango accounts are FDIC insured just like normal bank accounts, making Mango savings accounts the highest rate for FDIC insured accounts that I am aware of, although investors who engage in peer-to-peer lending are likely to earn an even higher interest rate.   To earn the 6% rate, one needs a direct deposit into his Mango account–otherwise the interest rate drops to 2%.  Of course, one can direct his employer to deposit his entire paycheck, or a selected portion of that paycheck, to a Mango account each month.  However, any ACH transfer into the account counts as a direct deposit, so one can also set up a recurring transfer of $1 or more into and out of the account every month from a linked Internet bank account (find out more about how to do this with an Internet bank here) and never worry about the direct deposit requirement again.  Finally, Mango Money charges a $3 monthly fee for having an account, so if one places $5,000 into a savings account, and incurs no other fees from Mango (and that should not be a problem) the net monthly interest rate is really 5.28% instead of 6% [ 12{100[(5000 x 0.06)/12 – 3]/5000}=5.28].  However, this is still an incredibly good rate of interest.  Of course, the less money one has in the savings account, the less worthwhile a Mango savings account is;  the break-even point where the 6% interest savings rate equals the $3 fee is $600 [that is, 3(12)/0.06].

I was a Mango customer from 2013 to 2016, and had my Mango accounts linked to my Everbank account to transfer money both in and out (of course, there are many other ways to deposit money in a Mango account) and have been thankful that God in His providence has allowed me to find out about and utilize their high-interest savings product.  As a prepaid card, their customer service is far from the kind of outstanding service one gets from a company that appeals to a more wealthy clientele such as Fidelity Investments.  While one can without too much difficulty reach a human being who works for Mango over the phone, initial level customer service agents are polite, but too often incompetent, often horribly so, utterly useless, and a waste of time to talk to.  When they have been incompetent, and I have asked to speak to a supervisor, I have usually, but not always, found the supervisor to be both polite and competent.  Mango recently made it so that one cannot just get transferred to a supervisor; thus, at this time to reach a competent person one needs to call (855) 515-CARD (2273) to reach someone who knows what he is talking about when the initial level reps are incompetent.  The initial level reps will not offer you this phone number, but will tell you that a supervisor will call you back, which, every time they have told me that, has never happened even once.  While I was glad to be with Mango for 3 years, because of the incompetence and because of the $3 monthly fee I have now switched to Netspend, even though their customer service is also seriously lacking.

There are other prepaid cards that offer high interest savings accounts, although none is as good as the rate with Mango.  Paypal offers a prepaid savings account sporting a 5% interest rate on balances up to $5000, although the $4.95 monthly fee reduces the actual rate of interest to 3.81% on a $5000 investment [12{100[(5000 x 0.05)/12 – 4.95]/5000}=3.812].  NetSpend has a savings account with the same 5% interest rate up to $5,000 and a $5 (minimum) monthly fee.  Vision Prepaid offers a 5.65% interest rate savings account, but since it is only good for balances up to $1,000, one can only make $4.71 a month–and that is without taking the fees into consideration.  Of course, if one wants a high rate of FDIC-insured interest and he already has three Mango Money savings accounts with the maximum interest-bearing balance of $5,000 in each account, opening savings accounts with other prepaid companies becomes a more reasonable option.  All of these prepaid savings account rates are competitive with the rates one earns in a rewards checking account, while Mango Money’s interest rate is better than that of any rewards checking account.  With many customers, Mango accounts will also involve less hassle to qualify for the high rate of interest than the work required to obtain the high interest rate in a rewards checking account.  To beat Mango Money’s interest rate, one needs to go to a non-FDIC insured route such as becoming involved in peer-to-peer lending or purchasing stocks or bonds.  While peer-to-peer lending is not FDIC insured, it is still, in my opinion, still a very worthwhile investment option, where one has a reasonable likelihood of earning 8-9% interest.  Both stocks and bonds are also worthy of careful consideration and a place in a diversified investment portfolio.

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Note:  If you use the link on this webpage for Netspend to sign up for an account,  I will receive financial compensation.  I can in good conscience say that there is nothing on this website that I would not have said were this not the case, and I believe that it is appropriate that we both benefit from the information I have put together for your betterment (1 Timothy 5:18).  However, if you are bothered by the fact that I will be compensated if you use these banners to sign up, you can sign up on the webpage of either or both companies without clicking on these banners, and I will get nothing.  If you choose to use the buttons on this webpage, I offer you my sincere thanks.