According to Mintel, a leading market research company, one factor in the growing popularity of prepaid cards is the fallout from discontent with traditional checking accounts. Either people are finding it harder to get a free and hassle-free checking account, or they don’t like the fees for such events as unintentional overdrafts or low balances.

In Mintel’s recent survey, 19% of respondents overall stated that they would be interested in using prepaid cards to pay bills, rather than a banking account. More importantly, 25% of households earning more than $100K per year, the more profitable and desirable customers for banks, agreed that they would be interested in using prepaid cards. Their main motivation was to avoid overdraft and/or other types of banking fees.

What are these prepaid card prospective customers looking for? Mintel’s research show:

What are the most popular ways for prepaid providers to offer incentives to attract this new class of customer? According to Mintel, approximately six in 10 people say they would be interested if a rebate or cashback were offered for using the prepaid card and seven in 10 find purchase discounts at merchants to be an attractive offer.

Fact is, with the new consumer protection laws put in place by congress, banks can no longer allow transactions for debit card holders create an overdraft. However, if a cardholder opts in for “overdraft protection” then they can put through overdrafts and potentially charge the customer a fee–either for the overdraft protection or for any overdrafts themselves. This is why you may have received ominous sounding emails or direct mail from your bank warning you that “you are no longer protected.”

Prepaid cash back rewards programs do exist. In fact MiCash is about to announce our own cash back rewards program very soon. Such programs let you shop at your favorite national or local retailers and restaurants, and redeem actual cash back that is credited to your prepaid card account.

If you visit personal finance websites (see our top 50 favorite personal finance sites) chances are you’ve come across the term “envelope system.” This is a popular way to help people who want to reduce their debt or simply get a handle on their spending. In its purest form, you take your paycheck, cash it, and divide your cash into envelopes according to budget categories. For example you would have an envelope for bills, food, eating out, gas, and so on.  When spending in any of your envelope categories, you turn to the envelope and draw out the cash you need to cover your expenses. If you find your envelope empty before your next pay period, you then would not be able to spend any more in that budget category and you would NOT borrow money from any of the other envelopes. What this system does is force you to stay within your budget by category and hence stay within your overall budget. It makes you think about spending because you actually handing over hard earned cash so in theory you should think twice about your spending.

Of course, it’s hard to pay bills in cash without having to visit the payment offices of your gas, water, sewer, electric companies, and sometimes these aren’t even local to where  you live. They also may not accept cash payments in the mail, and besides, it certainly isn’t wise to mail a lot of cash in an envelope. Thus, it’s highly likely that the majority of people who rely on the envelope system pay their bills online through an ACH transfer out of a bank account, or with a debit card or credit card account number. They only use the envelope system for food, eating out, and other purchases that you would make at a cash register in a store.

Here’s the biggest problem we see with the cash envelope system. It’s risky to carry a lot of cash. If you cash your paycheck at a check cashing service, you will pay a check cashing fee (versus paying no fee for direct deposit to a bank account or prepaid card account).  You might get robbed walking away from a check cashing place or at any point on the way home. Your cash stash might get stolen by anyone who discovers it in your home.

Finally, some personal finance gurus argue that using cash actually makes you spend more. If you have three twenties in your pocket, a $5 ice cream cone is in easy reach as a spontaneous purchase, but you may resist that cone if you thought about putting it on a credit card or prepaid card, just because it’s a small purchase put on plastic, and some merchants frown on that due to the swipe fees they pay.

Virtual Envelope System

Now imagine that you are using some budgeting software. Today there are many to choose from, or you can even set one up yourself in a simple spreadsheet. You set your budget categories in your electronic budget system. Your starting point might be historical spending going back a year or six months. It’s easy nowadays to download your transaction history from your checking accounts, credit card accounts, and/or debit card accounts. Then import that transaction history into your spreadsheet or budget software. Budget software can even show you your spending categories in a nice pie chart view, or  a table that may help you recognize patterns such as overspending immediately after payday.

Next, like the real envelope system, you divide your savings balance among your different categories. Then—and here’s the harder part with this digital system—you have to have the discipline to not go over your spending limit in each budget category or “virtual envelope.” How do you do this? By checking your budget spreadsheet each time you go out the door, so you know where you are for that category. Say, your “monthly MP3 budget” is $10 and you see that you’ve spent $10 last night downloading ten songs on iTunes, then you can’t buy any more MP3s until next month.

How debit cards make this easy is that you rely on them for all your spending. Avoid your credit cards (because you are likely trying to pay them down). Then, when you download your transaction history, all of that data will flow into your various spending categories automatically.

With a debit card you might lose it or get robbed but your money can remain safe. You have eliminated the risk of carrying cash. You will hopefully think twice about using your plastic for small spontaneous purchases.

With either system, you should soon learn the fine art of budgeting and be on your way to financial well being.

Now that the Senate has passed the massive financial overhaul legislation, the much debated bill is waiting President Obama’s signature. Among the many affects of the law is a cap on “swipe fees.” These are the interchange rates that merchants must pay the banks that manage the electronic payment networks for credit card and debit card transactions. For years gas stations and most retail merchants complained, rightly so, that the swipe fees were too high and that they kept rising, with no end in sight.

Illinois Senator Dick Durbin added an amendment to the financial overhaul legislation which directs the Federal Reserve to issue rules to ensure that debit card swipe fees are reasonable and proportional to the processing costs incurred. Right now Visa and MasterCard charge debit swipe fees of around 1 percent to 2 percent of the transaction amount — among the highest rates in the industrialized world. The Durbin Amendment, as it became known as, did not address credit card swipe fees, which are higher than debit card swipe fees and will likely remain so.

The new law also prevents card processing networks from forcing transactions to be run on only one card network. By giving merchants the option to run on more than one network, the hope is that competition will keep interchange rates down. Merchants can now also decline to allow a consumer to use a credit card for small transactions (say less than $10) where the interchange fee would represent too great a percentage of the overall purchase. This means that stores and gas stations can offer discounts to buyers who use cash or a debit card over a credit card, or conversely charge a fee to credit card holders to cover their higher swipe fee costs.

So, the bottom line is that lower swipe fees are good for the consumer. Banks, however, lobbied hard but failed to protect the fat profits they have made by continually raising interchange fees to merchants.

The New York Times reports that of all credit card hacking cases last year 38 percent were the result of breaches in hotel credit card security. This is because hotels lag behind banks and retail merchants in protecting credit card numbers from hackers. And it can take hotels months to discover the fraud, if in fact they ever do.

Fraud experts say that hackers often steal personal data and make multiple small charges to validate a card, probe its vulnerability and test the vigilance of a cardholder before making bigger charges.

Tip: check your credit card and debit card transaction history regularly, preferably online where you can spot a fraudster’s activity more quickly. Report even the smallest transaction that you don’t recognize.  Do this especially if you recently stayed at a hotel or motel. And don’t never leave credit card receipts lying around in your car or anywhere else. As the this article recommends, shred them. Shredders can be had at an office supply store for $20-$40 dollars.

Wal Mart could revolutionize banking the same way they did retailing, as a low-price leader. This has banks scrambling to prevent Wal Mart from becoming a full fledged bank. However, Wal Mart has already opened hundreds of Money Centers with store locations where customers can cash checks and receive money orders. Wal Mart, not surprisingly, has undercut its competition with lower fees for these services.  The corporation recently announced plans to open another 400 Money Centers in the coming months.  Recently, Wal Mart also purchased a minority stake in Greendot, provider of Greendot MoneyPaks as a way to reload prepaid cards.

Wal Mart is currently prevented from offering checking accounts. But it recently made some technical moves that could potentially allow it to make loans and accept savings deposits.

According to an MSN Money article, the potential benefits of Wal Mart’s competition against banks and check cashing businesses include:

But imagine for a moment if the world’s biggest retailer put the pricing squeeze on one of the world’s more profitable businesses: financial services. Who would pay the price? Perhaps:

• Mortgage lenders who surprise their borrowers with last-minute junk fees.
• Banks that nickel and dime their small account holders to death.
• Auto lenders who add discriminatory surcharges on loans to black and Hispanic buyers.
• Credit card companies that use every excuse to jack up rates.

Check cashers and payday lenders that levy usurious charges on their customers.

If you are traveling this summer here are some helpful ways to save money in the following categories.

Hotels

When traveling by car, pull into rest areas and pick up the local hotel guide. They are chocked full of coupons for discounts on hotel rooms. You’ll save 10% or sometimes more on the cost of an advertised room. The discounts can be even greater than the lowest available one at the check in desk, such as the AAA discount.

Book online ahead of time for exclusive online savings. Use sites like Priceline.com, Hotels.com, or go straight to the chain hotel’s website to see what deals are available.

Consider staying at a KOA campground in one of their cabins. While this is not a hotel, it is a way to camp without having to bring a tent or camping gear. But you will have to bring your own bedding. Many KOA campgrounds have all of the amenities of a hotel, such as a swimming pool, restaurants, and even movie theaters!

Food

Stay with friends or family and you will hopefully eat out less. Stay at hotels that offer continental breakfasts. Don’t buy anything from the hotel mini-fridge because the food and drinks are way overpriced.  Do you tend to buy drinks and snacks at gas stations? Why not pack a cooler with snacks such as fruit, trail mix, and water bottles that you fill at home instead of buying? If you aren’t in a rush to get there, order pizza, which is less expensive that even fast food places. Or pack some paper plates and plastic silverware and buy food at grocery stores that you can whip together, like bagged salads and cold sandwich fixings.

Car Travel

Have your tire inflated and you’ll see at least a 5% improvement on your mileage. Drive the speed limit. The faster you go, the worse your gas mileage. Don’t try to save by not running the airconditioning and rolling down the windows, because you will reduce the car’s aerodynamics and cancel out any gas savings, so you might as well stay cool.

While You Are Way

• Turn off your air conditioning or raise the thermostat before it kicks in.
• Put your lights on timers. They are cheap and available at hardware stores.
• Unplug large appliances like TV’s and computers. You’d be surprised how much energy they waste while off. In fact, it’s a good idea to buy those plug strips that you can turn off every night even when you are at home.

In the May 2010 issue of Reader’s Digest an article described some of the extremes people will go to to save money. The ones that leaped out at me were:

• Save a McDonald’s paper coffee cup to run into any McDonald’s restaurant and get a “free” refill. Another way to think about this is “stealing.”
• Reuse trash bags–they wait for the garbage man, dump the contents of the garbage bag into the truck and bring the empty bag back inside the house to do it again. Another way to think about this is “gross.”

Reader’s Digest invited readers to share their own extreme money saving tips and here is what some of them shared:

• Bring your own Tupperware to parties to bring home left over hors d’oeuvres.
• Reusing: toothpicks, paper towels, floss, plastic sandwich bags, tinfoil, and other things that are meant to be used once and disposed of.
• Retrieving toilet paper from the trees after someone’s house gets “TP’d.”
• Diluting shampoo, household cleaners, and liquor.
• Bring loved ones to the store and read out loud the greeting cards you “would have bought them” if you weren’t so cheap.
• Bring your own slice of cheese to fast food restaurants to make your own cheeseburgers.
• Swing by the recycle center or check neighbor’s recycle bins for magazines and the Sunday paper.
• Walk through fast food drive thrus and pick up the change that people have dropped but not bothered picking up.
• Look for food that is out of date at the grocery store–including dairy–and get it for half price.
• When traveling, bring an empty bottle and fill it at a water fountain after you go through airport security.
• Only put one bulb in a multi-bulb light fixture like a chandelier.
• Mail out Christmas cards without postage but put the recipient’s address in the return address spot, so the post office will deliver the card to that address stamped “insufficient postage.” (this too is stealing).
• Bathing only once a week to save water or saving your shower or tub water to flush the toilet or water your garden.