Tuesday, April 1, 2014

REPOST: Should I Get an Emergency Credit Card for my Teenager?

Parents often worry that their teenagers might find themselves lost or stranded somewhere with no way to pay for services such as towing or gas, but are at a loss of finding the right emergency fund source that their teens won't abuse. Bill Hardekopf of lowcards.com lists down a number of teen-safe options for emergency funding.

Image source: lowcards.com

Once your teenager is driving, it is a good idea that he or she have access to some funds in case of an emergency. You don't want your loved one stranded on the side of the road, unable to pay for a tank of gas or a tow truck.

Many people opt for an emergency credit card for their teenager, but this may not be the wisest choice. As a parent, you have a number of financial options. Which one you choose will depend primarily on costs and the financial responsibility of your teenager. That is a decision that only you can assess.

Prepaid Card

Obtaining a prepaid card for your teenager may be the least risky option to take from a parent's perspective. In this case, you simply sign up for a prepaid card and deposit however much money you want. If your teenager earns an allowance, you could start putting that money onto the prepaid card. The only problem will be if your child spends through it and has no money left over for emergencies.

Reloadable prepaid cards are usually set up in a person's name, so you will have to determine if you want it in your name or your teenager's name. If you set it up in your name, make sure your teenager knows the PIN number in case money has to be taken out at an ATM.

Prepaid cards come with setup fees, which are usually less than $10. But then you have to be concerned about the other fees on the card, like a monthly fee, an annual fee, a cost to check your balance and a deposit fee. Read the terms closely to determine if this is an affordable option for emergencies. Ultimately, you want something with the lowest fees possible.

Bank Account with Debit Card

If you want to set up a checking account with a debit card, you could do that as well. This will be similar to a prepaid card, but it will be something you can control at your bank. Make sure that the account you set up does not allow overdrafts. Your teenager may go on a spending spree without your permission, and the last thing you want is $30+ overdraft fees for every transaction that pushes beyond the account balance.

The good thing about emergency bank accounts is that you can easily transfer money from your account if necessary. With a prepaid card, a transfer could take three days or more to complete. If your account comes with high fees though, it may not be a good fit for you. That is why you have to review the terms. Call your bank and check out the fees associated with a checking account with a debit card.

Credit Card

Your teenager may not be able to get a credit card in his name due to his age. Thus, if you want to set up a credit card, it will need to be in your name. Make sure this card has a low credit limit, and closely monitor the charges. Anything that goes wrong will affect your credit score.

Credit cards are a good choice if you don't have the money to put into a prepaid card or checking account. However, they come with high interest rates so you'll want to pay off your balance in full at the end of each month. This may also be a good way to begin teaching your teenager about budgeting and money management. But realize that a credit card allows your teenager to spend up to whatever credit limit is on that card. You'll need to determine if your teenager can be trusted with that financial responsibility. If not, that financial responsibility of the card's debt falls on your shoulders.

Secured Credit Card

Secured credit cards are a combination of prepaid cards and credit cards. You put up the money for the balance, and that acts as your credit limit. If you deposit $500, the card will have a credit limit of $500. The catch here is that you have to pay back any money you spend.

You can get your money back if you cancel your card, but until then, you will have a chance to build credit by using the card and paying back the balance. This is not as risky as regular credit cards because you do not incur any debt. You will have to pay interest and a number of other fees, so check out the total fees before you choose this option.

Prepaid debit isn't just good for teaching teens money management. Visit the Achieve Card website to know more about the advantages of prepaid debit cards.

Monday, March 3, 2014

REPOST: 4 Risky Places to Swipe Your Debit Card

Most debit cards have security features that protect users from fraud but there are still instances when identity thieves succeed in their modus operandi. Here is a list of risky places where fraudsters are most active:
Image Source: abcnews.go.com

Would you give a thief direct access to your checking account? 

No? Unfortunately, you may be doing just that by regularly using your debit card. Debit cards may look identical to credit cards, but there's one key difference: With credit cards, users who spot fraudulent charges on their bill can simply decline the charges and not pay the bill. On the other hand, debit cards draw money directly from your checking account rather than from an intermediary such as a credit card company.
Because of that, even clear-cut cases of fraud where victims are protected from liability by consumer protection laws can cause significant hardship, says Frank Abagnale, a secure-document consultant in Washington, D.C. 

He cites the example of the TJX Companies Inc.'s T.J. Maxx data breach that exposed the payment information of thousands of customers in 2007. The incident resulted in $150 million in fraud losses, and much of it was pulled directly from customers' bank accounts. Although credit card users got their accounts straightened out and new cards were in the mail within a few days, the case created major problems for debit card holders, who waited an average of two to three months to get reimbursed, Abagnale says. 

While debit card fraud is always a possibility, being careful where you use it can help keep your checking account balance out of the hands of criminals.
Click here to view the whole article.

Achieve Card offers reloadable prepaid MasterCards to provide consumers all the conveniences of a traditional checking account and cashless transactions. Visit this website for more details on the instrument.

Saturday, February 22, 2014

REPOST: Why credit bureaus will never care about your debit card history

It should be an established fact that your credit card spending and debit card spending tell different stories and the latter will never be used to rate your credit-worthiness. This article from Yahoo! Finance explains this further.
Image Source: www.yahoo.com
When it comes to your credit score, there are five basic factors that matter: credit payment history; credit balances; ages of credit accounts; new credit inquiries; and types of credit accounts.

Notice a trend here? Credit. Credit. Credit.

Nowhere in your credit score does it reflect whether you’ve kept a healthy checking account balance, nor how many prepaid debit cards you own, how often you overdraw your account or the last time you contributed to savings. 

If personal-finance personality Suze Orman has her way, that could all change. Orman launched a Change.org petition in January asking Congress (specifically Sen. Elizabeth Warren, who is a longtime consumer finance advocate)  to make banks turn over non-credit banking history to credit bureaus. 

“Debit card users are at a serious disadvantage to building financial security because of senseless policy,” says Orman, who did not respond to a request to comment. “You could be the most loan-worthy person in the world, but simply because you chose to use a debit card rather than a credit card, you run a high risk that your credit score will be negatively impacted.”

She makes a compelling argument and her petition has so far attracted support from more than 175,000 people. Even we have to admit it all sounds great … on paper, anyway.

But do we really want to live in a world where our debit transactions are just as likely to wreck our credit as our credit cards? Here are a few reasons why this will never happen:

Creditors will never look at credit and debit use the same way

Credit scores exist to help lenders decide who’s most likely to be a trustworthy customer, and as of yet, there’s no proof out there that debit transactions indicate creditworthiness in consumers. For starters, you’re not using the bank’s money when you swipe your check card. It’s your money. Who are they to judge whether you’re spending it the right way or not?

“Just because it's being used in a plastic format and looks like a credit card, some people think it belongs on a credit report, which makes no sense,”  says John Ulzheimer, President of Consumer Education at CreditSesame.com. “Debit cards and prepaid debit cards are not credit obligations and are not liabilities. That's why they are not, and have never been, reported to the credit reporting agencies.”

You have to take the good with the bad 

Hypothetically speaking, if consumers were given better credit scores based on their debit card use, it goes without saying they could be docked points just as easily.

“It’s a slippery slope if you start putting debit history on credit reports,” says Ken Lin, CEO of CreditKarma.com. “There’s no magical solution where everyone’s credit scores get better. You have to count the positives with the negatives. That’s how our credit system works.”

It’s bad enough consumers shell out more than $200 a year for overdraft penalties. Imagine taking a hit to your credit score every time you accidentally cashed a check too soon or miscounted your bank account balance, as 28% of consumers did in 2013.

It’s well understood you can lose credit score points by closing credit accounts. It’s safe to assume consumers would also be penalized for closing or switching bank accounts, which 12% of consumers did in 2013. Banks themselves closed 30 million checking accounts between 2000 and 2005, according to a 2008 Harvard Business School report.

And what about the 10 million American households that don’t even have a checking account? Would their credit scores suffer the same as people who own too few credit cards?

Eventually, consumers will start to pay for it

As it stands, the credit reporting system is 100% voluntary, Ulzheimer points out. That means companies can decide whether or not to report customer credit activity on their own. If banks and prepaid debit card companies were suddenly obligated to report checking transactions to credit bureaus, eventually that extra cost would trickle down to consumers. 

“Forcing companies to report to the credit bureaus, notwithstanding the inappropriateness of debit cards being on credit reports, exposes them to Fair Credit Reporting Act obligations, which are very expensive with which to comply,” Ulzheimer says. “That means higher costs for all consumers.”

It won’t make prepaid debit cards any better for consumers

Prepaid debit cards are something of a controversial financial tool, given they often are laden with monthly charges and fees. Orman herself is one of many celebrities to lend their faces to such cards, marketing them as a useful budgeting tool for consumers weary of high-interest credit cards, or kids too young to own a checking account of their own.

But more often than not, they can wind up costing consumers even more than a regular checking or credit account.  Some, such as the Pink Diamond RushCard, charge up to $10 a month just for the luxury of holding the card, while most charge at least a couple of bucks for ATM withdrawals and reloading fees — both of which you can do for free with a regular bank account.

“Even the most un-free checking account is probably cheaper than your average prepaid card,” writes Nerdwallet’s Anisha Sekar. “Any budgeting help or self-discipline you get from a prepaid debit card will be wiped out, and then some, by fees. It’s generally more expensive than a credit card, but without the ability to borrow.”

Even if prepaid debit card issuers were to start reporting transaction history to credit bureaus, there are still few justifiable reasons to own one.

Says Ulzheimer: “Pretending like the world would be a better place just because prepaid debit cards could be reported to the credit bureaus ignores their larger downside, which is that they're horrible products heavily marketed to young people and minorities."

The bottom line:

While we agree credit reporting agencies have a long way to go in the realm of consumer-friendliness, we think their resources could be much better spent elsewhere (for starters, figuring out how 42 million errors wound up on credit reports last year).

Even if lawmakers back a plan to include debit transactions in credit reporting, credit reporting agencies  aren't going to simply roll over and play ball until debit history can be proven to indicate credit worthiness. That, after all, is what a credit score is supposed to indicate in the first place.

In the meantime, there are many proven ways you can improve your score without having to picket on Capitol Hill. Start by making on-time payments, tackling high-interest credit card debt above all others, and keeping your card balances under 10%.

Prefer to ditch credit altogether? It's possible to limit your credit use and still build up your score. Your on-time student loan and mortgage payments both count toward your credit score. You can also research alternative ways to boost your credit, such as taking out a secured credit card or a credit-builder loan through your local bank or credit union, or by keeping track of on-time rent payments. 

In response to a request for comment, a spokesperson for Sen. Warren issued this statement to Yahoo Finance:

“Senator Warren believes it’s important for families to have various ways to build their credit and enhance their access to affordable financial products and services.”

Will debit card reporting be one of those ways someday? Time will tell.

But we wouldn't bank on it.
Achieve Card provides consumers with all the conveniences of a traditional checking account without the additional hassles with its reloadable prepaid MasterCard offering. For more information, visit this website.

Thursday, January 2, 2014

REPOST: What Is the Difference Between a Credit Card and a Debit Card?

Miriam Caldwell of About.com writes about the major differences between credit cards and debit cards and their pros and cons.
Debit cards and credit cards are accepted at the same places. Debit cards all carry the symbol of one of the major types of credit cards on them, and can be used anywhere that credit cards are accepted. They both offer convenience. The fundamental difference between a debit card and a credit card account is where the cards pull the money. A debit card takes it from you banking account and a credit card charges it to your line of credit. 

Debit cards offer the convenience of a credit but work in a different way. Debit cards draw money directly from your checking account when you make the purchase. They do this by placing a hold on the amount of the purchase. Then the merchant sends in the transaction to their bank and it is transferred to the merchants account. It can take a few days for this to happen, and the hold may drop off before the transaction goes through. For this reason it is important to keep a running balance of your checking account to make sure you do not accidentally overdraw your account. It is possible to do that with a debit card.

Image Source: www.pscunow.com
A credit card is a card that allows you to borrow money in small amounts at local merchants. You use the card to make your basic transactions. The credit card company then charges you interest on your purchases, though there is generally a grace period of approximately thirty days before interest is charged if you do not carry your balance over from month to month.

Image Source: www.digitaltrends.com
In the past many people felt that you needed a credit card to complete certain transactions such as rent a car or to purchase items online. They also felt that it was safer and easier to travel with a credit card rather than carrying cash or trying to use your checkbook. However debit cards offer the same convenience without making you borrow the money to complete the transactions.
If you find that credit cards aren’t worth the effort, perhaps using a debit card might be in order. Learn more about prepaid debit cards from the Achieve Card website.

Monday, December 2, 2013

REPOST: Prepaid debit cards: Are they right for you?

Prepaid debit cards have been gaining popularity among Americans in the past few years. Find out if they can really help you financially by reading this article from The Huffington Post.
Just because Russell Simmons, Magic Johnson, Justin Bieber and a host of other celebrities are endorsing prepaid debit cards, it doesn't mean they are right -- or wrong -- for you.

Prepaid debit cards have stirred up controversy in large part because the heavily marketed celebrity cards can be terrible deals. The monthly fees, activation fees, reload fees and random service fees on some of these cards are shocking. The Russell Simmons RushCard, for instance, charges $9.95 for a monthly plan, which is $5 more than the average monthly fee. With Suze Orman's Approved Card, you get one free chat with a customer service agent each month -- then you get charged $2 per call.

Unfortunately, these cards steal the limelight from prepaid cards that actually provide a cheap, safe and accessible alternative to checking accounts and debit cards.

Image Source: www.blog.credit.com
Good and bad eggs aside, the prepaid market has grown rapidly. In 2009, $28.6 billion was loaded onto prepaid reloadable cards. In 2013, Mercator Advisory Group projects that this number will reach $201.9 billion.

Here's why: On July 1, 2010, the Federal Reserve adopted regulation prohibiting banks from automatically adding customers to overdraft protection programs. They also required that banks drop customers from these programs unless they explicitly chose to opt in.

Overdraft protection programs were the way that banks generated $37.1 billion in revenue from "free" checking accounts in 2009. Let's say you had $4 left in your checking account and tried to spend $7 on a sandwich using your debit card. Without overdraft protection, the charge would be denied. With overdraft protection, suddenly you're charged a flat fee for exceeding your balance. The average fee was $34 at the country's 33 largest financial institutions in 2012.

So starting with overdraft legislation, the availability of free checking accounts began to dwindle because they weren't delivering revenue like they used to. Big players like Chase, PNC Bank, Well Fargo, Bank of America and CitiGroup, among others, have all dropped free checking for clients who cannot meet specific balance requirements.

As a result, prepaid debit cards have become an attractive alternative not only for unbanked consumers, but also students and low income families that don't want to pay for a checking account.

Image Source: www.kroger.com
Want to know if a prepaid card is right for you? Here's how to work through the decision:

Can I get a checking account?

If you're a U.S. resident, you probably can get a checking account. However, if you had a checking account that was closed for negative balances or dishonest conduct, you may have been reported to ChexSystems, the database banks check when they decide whether to take you on as a customer or not. If this is the case, and you can't successfully dispute the claim, you probably can't get a checking account.

If I can get a checking account, will it be free?

Even if you can get a checking account, can you meet the minimums for a free account? For example, to get free checking from Chase, you need monthly deposits totaling $500 or more, a minimum balance of $1,500 or an average daily balance of $5,000 in linked deposits and investments. Otherwise, you pay $12 per month. Bank of America is nearly the same: $250 monthly or $1,500 minimum, otherwise you pay $12 per month. If you can't meet minimums, look at prepaid options.

What will I get out of a prepaid debit card?

Essentially, you get "light" checking account features. There's no approval process, so you don't need a good credit score and they won't affect your credit score. You can load money, set up direct deposit, transfer funds and sometimes scan checks. You use them to pay bills and buy goods, like a debit or credit card, and some provide an option for writing checks. They're also a great tool for budgeting or learning to budget because you can't overdraft or accrue interest charges. It's a much better choice than stuffing cash under your mattress.
Image Source: www.usatoday.com

What do I look for?

Above all else, keep an eye out for high or hidden fees.

One of most transparent and cheap cards comes from American Express. The Bluebird (available at Wal-Mart) has no regular fee. You get charged $2 if you use a non-MoneyPass ATM. You can set up direct deposit, reload the card for free at Wal-Mart, scan checks with the Bluebird mobile app and even write Bluebird checks (the first 50 checks are free, the next 50 cost $26).

In July 2013, Consumer Reports ranked 28 prepaid cards, and the Bluebird took first place. Second and third place belonged to the H&R Block Emerald Prepaid MasterCard and the Green Dot Card from Green Dot Bank.

Basically, if free checking isn't an option for you but you want some of the perks of banking and debit cards, look at a prepaid debit card and find the one that has the lowest fees. After all, you don't want to spend a lot of money to be able to spend your hard earned money.
Achieve Card is a leading provider of prepaid debit cards issued by the First California Bank and licensed by MasterCard International Incorporated. Learn more about this prepaid debit card by visiting this website.

Wednesday, October 30, 2013

REPOST: Prepaid Debit Cards Shed Some Fees, but Face Scrutiny

Prepaid debit cards "have grown in popularity in recent years and are now offered by major banks as well as alternative financing companies." Although these cards can be a good deal for some customers, some may want some federal oversight, reports Ann Carrns of The New York Times.

Prepaid debit cards continue to grow more popular and offer more services that mimic traditional debit cards, even as the federal government weighs new rules for the cards.

The new Serve card is one of several prepaid cards from American Express.
(Image source: nytimes.com)
In the latest expansion of a prepaid card offering, American Express on Tuesday announced that starting in November, customers will be able to load cash onto its Serve prepaid card, without charge, at about 14,000 CVS and 7-Eleven stores. The move is part of a revamping of the card to make it more attractive to customers who don’t use traditional banks, said Dan Schulman, head of the enterprise growth division at American Express.

That means if you’re a customer, you’ll be able to have the funds automatically loaded onto your Serve card by swiping it at the register, without having to buy a separate cash-value card first. (The arrangement is like the one for Bluebird, an American Express card that can be loaded directly with cash at roughly 4,000 Walmart stores.) And customers can withdraw cash free at A.T.M.'s on the Money Pass network, found in convenience stores and other retailers.

The direct-load option eliminates a step in reloading the cards that consumers find inconvenient, Mr. Schulman said; after buying the cash-value card, customers must either call or go online to have the funds transferred to their prepaid account. The cards typically cost $3 to $5 and, since most customers reload prepaid cards two or more times a month, the fees add up.

Many prepaid debit cards offer direct deposit of paychecks and benefits checks (as Serve now does, too). And more are also offering mobile apps that let customers deposit paper checks by snapping a photo of them with their smartphones. (Serve says it will add that function, too, later this year.)

Along with the extra options, Serve is adding a monthly service fee of $1, which can be waived with direct deposit.

The changes are the latest move by American Express to go after less affluent and younger customers. A recent report from Javelin Strategy & Research found that not only customers who lack regular bank accounts but also younger, “Generation Y” consumers are more likely to use prepaid cards.

The cards have grown in popularity in recent years and are now offered by major banks as well as alternative financing companies. In 2009, consumers loaded about $29 billion onto the cards; that figure was expected to reach nearly $167 billion next year, according to the Consumer Financial Protection Bureau, which is seeking public comment on possible new rules for the cards.

Susan Weinstock, director of the Pew Charitable Trust’s safe checking project, says prepaid debit cards can be a good deal for some consumers who are leery of unexpected overdraft fees, which average about $35 with a regular bank account. “We really think this has some good possibilities,” she said.

However, she and other consumer advocates want the cards to have more federal oversight, including better disclosure of fees, so customers can determine how much they will be paying to use the cards.

Here are some questions about prepaid cards:

How does a prepaid debit card differ from a traditional debit card?

Traditional debit cards are linked to bank accounts, which carry protections like federal deposit insurance to safeguard your money in case of the bank’s failure. According to Pew, prepaid cards aren’t required to carry individual federal deposit insurance; many cards pool money in bank accounts that are federally insured, but the nonprofit says that method may still leave customer funds vulnerable in some situations.

Can I pay bills with a prepaid cards?

Many prepaid cards offer online and mobile bill payment. Some consumers maintain traditional checking accounts but transfer money onto prepaid cards to pay bills, to help make sure they don’t overspend.

What happens if I spend more than the balance on my prepaid card?

For the most part, according to Pew, prepaid cards don’t allow customers to spend more than their card balance, so you can’t rack up overdraft charges. But there’s no rule to prevent them from doing so — and a handful do, according to a 2012 Consumer Reports analysis.

Are there any drawbacks to prepaid debit cards?

The cards provide an alternative to checking accounts for many consumers, but they aren’t yet federally regulated in the same way that traditional debit cards and credit cards are. That means the companies aren’t required to disclose all the fees they charge, or limit a customer’s losses from unauthorized transactions (although many do so voluntarily). The Consumer Financial Protection Bureau, however, is considering new rules that would extend such protections to prepaid cards.

The convenience of cashless shopping without the possibility of spending beyond their means is the reason many consumers now are favoring prepaid debit cards like Achieve Card. For additional information on how these cards work, log onto this website.

Tuesday, October 1, 2013

REPOST: Credit card defaults on the rise along with job losses

The economic crisis may be coming to an end in America, but other countries are still suffering from its ripple effects.  This article from the Sydney Morning Herald discusses the causes for a declining credit situation down under.

A growing number of Australians are failing to pay their credit card bills, in a potential warning sign more households are struggling with their finances as the economy weakens.
Figures from credit reporting agency Veda show the number of customers defaulting on their credit cards has increased steadily throughout the year, rising by 15 per cent in the year to August.
It really is the canary in the coalmine if you cannot pay your credit card 
The company, which holds some 16 million consumer credit files, says there has been a year-on-year rise in defaults in almost every month since January, the trend worsening in the last few months and spiking at 29 per cent in July.

A default occurs when a bill of more than $100 is not paid within two months.

Banks and other businesses that extend credit to households, such as utilities, are also calling in the debt collectors more frequently.

Debt collection agency Dun & Bradstreet said the number of consumer debts referred to it rose almost 5 per cent in the June quarter, on top of growth of more than 15 per cent in the March quarter.

Failure to pay a credit card debt is often the first sign consumers are struggling with expenses and the trend could be a result of rising unemployment, which is at a four-year high of 5.8 per cent.

However, it is at odds with a falling number of people defaulting on their home loans, which are a much larger source of household debt.

The principal solicitor at the Consumer Credit Legal Centre, Katherine Lane, said she had seen an increase in the number of people seeking financial help after losing their job.

''It's not as bad as pre-GFC but you can tell that things are not going as well as they were,'' she said.
Ms Lane said credit card debt was the first type of loan people tended to default on and it often pointed to further financial problems down the track, including further defaults.

''It really is the canary in the coalmine if you cannot pay your credit card,'' she said.
She advised people who were struggling with credit cards to organise a repayment plan with their bank.

While home loan interest rates have fallen sharply this year, credit card interest rates barely budged.
The Reserve Bank noted the trend in its latest check-up on the financial system, saying the ratio of soured personal loans, at 2.1 per cent, was more than double the rate from before the global financial crisis.

The central bank did not appear overly concerned, saying personal loans were less than 5 per cent of banks' total loans and home loan default rates were moving in the other direction. But it also said an ''underlying deterioration in credit quality'' could not be ruled out.

Last month the Commonwealth Bank played down a rise in the number of people falling behind on personal loans as ''seasonal''.

To make receiving payments easier, AchieveCard allows paychecks, social security checks, and unemployment checks to be deposited directly into their card holder's prepaid debit card accounts. Click like on this Facebook page to read more about their services.