Going Plastic with the Envelope System Budget


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VISA Prepaid Clear with Kaiku

This is a sponsored post written by us on behalf of the Visa Clear Prepaid program and the Kaiku® Visa® Prepaid Card. All opinions came straight from our own noggins, not a robot’s.

Our very first month of budgeting, we drove to the nearest Staples and bought a ton of plain paper envelopes. We labeled them and excitedly filled them with cash. We were pumped to show our finances who was boss, and the envelope system of budgeting seemed like just the way to do it.

I mean, it was fool proof. Once an envelope ran out of money, we were done spending for the month — whether we liked it or not. Spending with something very finite also made us aware for the first time of every cent we spent because we were forced to think of each category as a separate bank account that was frequently hovering near zero. In short, the envelope system trained our brains to budget properly.

After a month or two with the envelope system, we quickly became aware of the drawbacks once we were relying on cash for everything. First, who still uses cash (except every food establishment in NYC)? In a fast-paced world where cash is rarely seen, it felt unnecessarily cumbersome to pay for everything with it. If we spontaneously needed to buy something and we didn’t have cash from our envelopes with us, tough luck. Nowadays, we buy almost everything online, from clothes to groceries to diapers, and if you haven’t checked recently, there’s no cash option. When we first started budgeting, we’d find ourselves buying something online with a credit card and then acting like a bank teller, moving money out of one envelope and then re-depositing it at our bank. It was weird and complicated. And eventually, it led us to stop using the cash-only system of budgeting. Why? Well, because we weren’t actually using cash-only and we weren’t willing to, either.

Have you been waiting for the “but”? Cause here it comes… BUT, we recently learned about a possible hybrid approach to the envelope system that provides all the perks without any of the drawbacks of that antiquated paper we call cash. Enter prepaid cards.

The idea behind a prepaid card is simple. You load whatever amount of money onto your card and you can spend and access it wherever debit cards are accepted. So think of it as your envelope, except now it’s convenient and plastic and it’s not something your grandma used to send you a gift card in and sealed with a kiss.

Kaiku Prepaid VISA cardsFor the next few months, we’re teaming up with Kaiku and Visa to learn and try out the Kaiku® Visa® Prepaid Card, part of the Visa Clear Prepaid program. In the past, it has been hard to browse through the hundreds of prepaid card options and figure out what sort of fees they charged. No longer, peeps. In order to be part of the Visa Clear Prepaid program, cards are required to clearly communicate their monthly fee plan. That way you’ll know when you pay a fee and when you won’t. Beyond that, cards that are part of the Visa Clear Prepaid program also help protect you as a consumer by preventing overdrafts (and avoiding overdraft fees and spending more than your “envelope” aka budget allows).

Getting and activating the card was simple. The Kaiku® Visa® Prepaid Card is smartphone-friendly and we signed up right on their website. A week later, we received our card in the mail, which included instructions on how to load it with dough. You can put money on the card via mobile check deposit (7-10 business days, free), bank transfer (2-4 business days, free), or in person at a Visa Readylink location (funds available immediately, $2.95-$4.95 fee). Since we were running up on the end of the month, we stopped by a Visa Readylink location down the street and paid a couple bucks to load some money onto the card.

We’ve decided to give our grocery budget a whirl for our first month of trying it out. Most categories of our budget stay in line from month to month, but grocery always seemed to be the untamed beast (which we’ve detailed here), so we’re hoping that the prepaid card will reign in some of our we-buy-way-too-much-candy-for-our-age ways. Our biggest fear (and possibly perk) is knowing that there’s no backup reserve of cash. Once we’re out, we’re out. It’s also comforting to know that the card doesn’t permit overdrafting, but it will be weird working with such a fixed amount of money that doesn’t respond to our “but we deserve Mexican take out again!” pleas.

Anyway, we’re super excited to give it a whirl. Has anyone else tried using prepaid cards as an alternative to the envelope system? And what’s held you back from the keeping up with traditional envelope system?

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24 Comments

  • Reply Jessica @ Our Young Adventures June 17, 2015 at 7:52 am

    Every time I see or read about the envelope system I come to the same conclusion…I.Don’t.Use.Cash. The thought of going to the bank and withdrawing my whole paycheck is too scary. This is a great alternative I never thought of! I don’t know if the fees for me, but definitely an excellent alternative!

    • Reply Johnny June 17, 2015 at 8:37 am

      Amen. So here’s the deal with fees… there’s a $3 maintenance fee unless you put more than $750/month on the card — then there’s no fee. Like most debit cards, if you choose an ATM that’s out of network, there’s a fee to withdraw cash. And then there aren’t any other fees if you deposit your money via mobile deposit from your bank. This is a prettier way to see everything I just said: https://www.kaiku.com/fees

      So that’s the trade off for us. A $3 fee to have a 21st century “envelope.”

      • Reply Elizabeth Nenque September 30, 2016 at 3:10 pm

        So, I just signed up for Kaiku. It seemed like a good idea. But the problem I see right now is that in order to have multiple envelopes/account, you have to have multiple login accounts. Or at least, I can’t figure out how to have multiple accounts/envelopes in one profile. You can have secondary card holders, but this is not the same as having a separate envelope/account. What are your thoughts on how to mitigate this? I was thinking of getting 3 cards – grocery, stuff, personal discretionary.

        Elizabeth

  • Reply Eryka June 17, 2015 at 8:21 am

    I’m very skeptical of the fees. I doubt the fees would make it worth it for most people.

    • Reply Johnny June 17, 2015 at 8:43 am

      Definitely something to be skeptical about. I mentioned it in the comment above, but for us, we’re looking at a $3 maintenance fee a month. For a larger budgeting category like Food or Everything Else, the fee is pretty negligible if it keeps us from going over. BUT, if the category is something small or variable like Pet or Clothing, then yeah, probably not worth it.

  • Reply Rob June 17, 2015 at 8:29 am

    I rarely use cash either but I do keep some on me, for emergencies and in case I need to make a small purchase and the merchant doesn’t accept credit cards (which, incidentally, they have to pay a small fee to the credit card company to process). I’ve never used the cash envelope system either. From the get-go I’ve always kept a pretty realistic budget, broken out into several expense categories (food, gas, entertainment, internet, etc.). Each day I then record all my expenses (even the smallest ones) against these categories. Once the actuals get close to the budgeted figures for that month then spending for that month is usually terminated until it gets replenished in the following month after payday. In other words, I let my budget vs actuals spreadsheet control my spending. It’s a personal choice. Whatever works best.

  • Reply Brian June 17, 2015 at 8:57 am

    My hatred of fees would keep me from doing this. Why would I want to pay someone to store my money when I could keep it in the bank and not pay a fee?

    I mean I guess if it works for you great, but it just isn’t for me.

  • Reply Beth June 17, 2015 at 9:15 am

    Ahhhhh, thank you!!! Whenever my friends have talked about using the cash only system i’ve always just kept my mouth shut and silently screamed. Like you, most of my purchases come from Amazon so it’s just messy. but I do like the idea of “running out” of money, just minus the cash. :)

  • Reply Laura June 17, 2015 at 9:34 am

    I think it sounds good, if someone needs to get a tighter control on their finances. I’m with Rob – I keep a spreadsheet and can hold myself accountable that way, but it is definitely easy to go over budget. I wouldn’t be willing to pay the fee on top of giving up my credit card rewards!

  • Reply Krysta June 17, 2015 at 9:51 am

    So my question with the prepaid cards: If say there is $3.73 left on the card for my food budget, and I’m about to swipe my card to pay for that super fancy venti frappuccino that is $5, will the card go down to a zero balance allowing me to pay the difference with another source (this breaking my budget…Dave Ramsey would not approve)? Or in order to use up the balance of the card does it have to be the exact amount? I seem to run into this problem with prepaid Visa giftcards and it’s a little bit of a turnoff.

    • Reply Team Kaiku June 17, 2015 at 12:50 pm

      Hi Krysta, great question! If you don’t have enough money loaded on your Kaiku Card to complete a transaction, the card will simply be declined. This means NO overdraft fees or negative balances. However, other prepaid cards may have different policies on this. Always read your cardholder agreement when you receive a new card.

  • Reply andee June 17, 2015 at 10:22 am

    I use cash for things that are feasible to use cash for – groceries, but not electricity bills etc. There is an actual transaction happening when you use cash, you trade the cash money in your hand for the product that doesn’t happen with a debit card because you just put the card back in your wallet. There is a tangible loss with cash so you feel your purchases more, which is I am partial to cash despite it being a pain.

  • Reply Kristina June 17, 2015 at 11:28 am

    This is an excellent tool for reigning in one’s budget. I would have LOVED to utilize it, but was denied.
    It appears that for those of us who could really benefit from it the most will not be able to use it at all. Very discouraging.

  • Reply Brittany T June 17, 2015 at 11:29 am

    We have four accounts through US Bank – a catch-all checking account, a savings account, and two “allowance” accounts. My husband and I are both listed on both allowance accounts, but we each get one of them. Every month we put $75 into each allowance account, and that way we can use our debit cards for online purchases or just instead of cash. We use our allowance accounts for things that don’t affect the other person, like coffees out or clothes. We use YNAB for the checking account. That’s our way of avoiding cash.

  • Reply Mackenzie June 17, 2015 at 12:43 pm

    I did a “cash envelope” budget for several months. I agree that the drawback is that there are a lot of purchases that are automated, or things that you typically only buy online.

    There are several apps that let you create virtual “envelopes” (I used Goodbudget) and load your categories with the amounts that you need to keep under for the month. Then you log your transactions every day (plastic or cash), and can see where each “envelope” stands. It does require a bit more willpower etc to not continue to spend out or a zeroed category, but it is the same idea as the envelopes.

    I found this to be more convenient than an excel spreadsheet on my computer, as I could check in on my phone before I went out for lunch/stopped at Old Navy/the grocery store etc. I spent cash where it was easy to, but also used my debit card as I saw fit as well.

  • Reply Katie Ball June 17, 2015 at 3:25 pm

    OH MY GOSH I AM TRYING THIS TODAY!!!!!! I was JUST thinking yesterday how nice it would be to have a card for certain categories – particularly groceries!!! But this would also be perfect to load up spending money!

  • Reply Amy Sadler June 17, 2015 at 3:30 pm

    This would be great! I ALWAYS overspend on groceries and eating out–Maybe this is my answer??

  • Reply Little house June 17, 2015 at 4:40 pm

    The envelope system always seemed too burdensome to use and i also don’t use cash. I’ve often thought about using a prepaid card for certain categories like groceries and personal items, but the fees have really kept me from pursuing that idea. I’m interested in reading about your take on this card once you’ve had a chance to use it over a month or two.

  • Reply CPP June 18, 2015 at 2:58 pm

    Joanna and Johnny, I’ve loved your blog for close to a couple years now but don’t think I’ve ever commented. I have to let you know I’m somewhat surprised and disappointed to see this type of sponsored content. Pre-paid cards are a racket — between usage fees (how can it be a wise replacement for the envelope system if you’re shelling out $3/month/card? you need multiple cards to act as ‘envelopes’ and there’s a slim chance that any of a person’s or family’s individual ‘envelope’ amounts will be >=$750/month)–AND the fact that, as one other commenter alluded to, the KAIKU company POCKETS whatever amount you can’t spend down to an exact $0.00 balance, from each card! Please consider pulling this post, and your association with a company like that. I really have a hard time believing that you yourselves would adopt such a system absent a sponsorship agreement.

    • Reply Johnny June 18, 2015 at 3:42 pm

      Hey CPP! Thank you for the thoughtful comment. We aim to please everyone, but for some reason we always miss the mark, despite our best efforts. 😉 We receive dozens of offers to work with brands on a daily basis and we’re very, very careful with who we choose to work with. We never accept anything that doesn’t align with our values or would lead our readers astray.

      In this particular case, we believe that a $3/month fee is well worth the cost for sticking to a budget. Much in the same way that we recommend a budgeting app that costs $5/device, despite the fact that there are thousands of free options — it’s a small expense for the end result. While it might not be practical to use cards for every category, we’re currently trying the prepaid cards with our Grocery and Everything Else categories as they’re both pretty significant monthly costs AND categories that we have the most trouble sticking to. We’re merely presenting prepaid cards as one of countless options (many of which we’ve also posted about) when it comes to wrangling one’s spending.

      These prepaid cards won’t be right for everyone, as some readers have already indicated in the comments above. That’s totally fine and expected! [Insert cliche “Personal finances are personal” bit here.] Long story short, we really do appreciate your feedback and hope you understand that we don’t take lightly who we choose to associate with.

  • Reply Meg C June 19, 2015 at 4:07 pm

    I think one of the main things to keep in mind, CPP is that the cards are reloadable. So if you get down to $3.45 you simply add more money to the card to reuse. That seems to be the intent of the blog post and frankly I agree that $3 fees are small and this is a good alternative to be used.

    Thank you, Johnny & Joanna for sharing various different types of tools we can use. Different perspectives are always great and I love the respectful conversations you have in the comments.

  • Reply Caitlin September 21, 2016 at 10:53 am

    Great article! I am dabbling in the envelope system but agree cash is just inconvenient at times. However, I do have a question. With the envelop system I have different categories (as I’m sure most do). Is it possible to get multiple prepaid cards? One for gas, one for groceries, etc.

    • Reply Johnny September 21, 2016 at 12:48 pm

      You can, the only issue is it’s going to cost ya in some of the monthly fees assessed by these prepaid cards. You could possibly consider purchasing AMEX or VISA gift cards to handle those various categories, but they wouldn’t be reloadable.

  • Reply Rachael August 10, 2017 at 7:59 am

    I am starting this with gift cars only. Any really odd one time expenses will go on my regular card. Amazon is my dominate shopping place next to Walmart. And they have gift cards. Plus, they’re always no fee. Only problem is if they’re lost. Then they’re lost. :(

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