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Innovations and Payment Systems

Sharing money with caregivers: What’s the best payment method?

Credit cards, prepaid cards, apps and cash offer varying levels of convenience and security

Summary

If you provide care to an adult or a child, you may have to hire outside help to run errands, pick up groceries and perform other tasks. There are several options for giving paid caregivers access to money to fulfill those obligations, but some are less practical and even riskier than others.

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If you’re one of the millions of Americans who provide care to an adult or a child, you may have to hire outside help to run errands, pick up groceries and perform other tasks.

While there are several options for giving paid caregivers access to money to fulfill those obligations, some are less practical and even riskier than others.

Anytime you give someone access to money on your behalf, there is a level of risk. For example, someone with too much access to family finances can steal money or even gather your personal information to commit identity theft.

One way to minimize risk is to run a thorough background and credit check, suggests the San Francisco-based Family Caregiver Alliance, an organization that educates caregivers and acts on their behalf. The payment vehicle you use can also minimize the risk, so families should consider the various methods carefully to determine what works best for them.

Selecting the best payment method for a caregiver: Pros and cons

  • Prepaid reloadable card: You can set a spending limit, but you may have to pay fees
  • Credit card: You can track purchases and set a spending limit, but your credit may be at risk
  • Money transfer app: Convenient, but you can’t track purchases
  • Cash: Can be inconvenient, particularly for last-minute purchases

Analyzing payment tools

There are a number of factors that are important in a payment tool for paid caregivers.

  • You want to know that the money is being spent on what you intend for it to be spent on.
  • You need to account for the possibility that you’ll be replacing caregivers frequently. The rate of turnover among caregivers is more than 60 percent, according to Rexburg, Idaho-based research firm Home Care Pulse. A payment method should be easy to transfer from one caregiver to another.
  • The system must be reliable. Caregiving is ongoing; your loved ones need care even if you go out of town or can’t get to the bank. A payment method must be able to work despite what’s going on in your life.

Once you understand your needs, you can examine each payment option through that lens.

Sorting through the options

There are a variety of payment methods that could get the job done. Here’s how they stack up.

Prepaid reloadable card

One of the biggest benefits of a prepaid reloadable card is you can transfer money to it as needed from any location.

“Say I’m out of town this week; I can just transfer the money online,” says Kai Stinchcombe, CEO at San Francisco-based True Link Financial, a company that offers a prepaid card for caregivers.

Prepaid reloadable cards are also practical if a caregiver is replaced, since you can simply stop loading money onto one card and get a second card. And there’s a limit to what the paid caregiver can take if you move money a little at a time, Stinchcombe points out, which can limit damage from theft.

Some prepaid cards let you set limitations on where the card can be used and how much can be withdrawn at a time. Some also let you manage your account by tracking transactions and getting spending alerts via text.

When considering using prepaid reloadable cards, understand that convenience often comes at a cost. You may have to pay a monthly charge or fees to set up or add money to the card.


See related:  6 steps to using credit cards to manage caregiving costs

Credit card

Another option is to add the paid caregiver to your credit card account as an authorized user. The caregiver would be able to use the card to make purchases.

Credit cards provide great monitoring features since “cardholders can track the purchases on their card through mobile and online banking,” says Betty Reiss, a representative for Bank of America.

You may also be able to set spending limits. For example, American Express lets you set spending limits for additional users to as low as $200. Credit cards also have features that can give you additional peace of mind. For example, Capital One customers can get real-time purchase notifications through the mobile app to see when an authorized user has made a purchase using the card.

While making someone an authorized user on a credit card may be effective if you have one long-term caregiver, it may not be practical if your paid caregivers are working temporarily.

There’s also the risk that a paid caregiver will make a large unapproved purchase and leave you holding the bill – which could also jeopardize your credit. Keep in mind that an authorized user is not legally responsible for paying back charges on your account.

Money transfer app

Money transfer apps such as Venmo and Cash App are convenient since you can transfer money at any time and from any location. However, money simply moves from your account to the account of the caregiver. You have no way of knowing how the money is spent unless the paid caregiver shows you the receipts for the purchases and you reconcile the amount spent with the amount of money you transferred.

Cash

Giving a paid caregiver cash may seem like the easiest option, but you have to be physically present to hand over the money. That makes it difficult to rely on the caregiver to make last-minute purchases since he or she might not have enough to pay for the purchases and be reimbursed later, Stinchcombe points out.

See related:  Be cautious before helping seniors with their finances

Establish clear spending guidelines

Regardless of the payment system you decide on, it’s important to give the caregiver guidelines to ensure both of you are on the same page, says Katie Provinziano, managing director of Westside Nannies, a Los Angeles-based agency.

Provinziano recommends clients use credit cards to give nannies access to money for caregiving expenses. She also suggests caregivers snap photos of receipts and upload them using apps such as Zoho Expense and Expensify.

The payment vehicle is only as effective as the guidelines that govern it, Provinziano says.

“The caregiver must understand what the limitations are.”

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