Prepaid Debit Card Reviews, Complaints, Etc

Author: Chris Warren

The Race Is On: Comparing Apple Pay and PayPal

Comparing Apple Pay and PayPal. That is what a lot of consumers interested in ditching the plastic in their wallets will be doing now that PayPal has made it clear that it’s going to make a play for the growing mobile payments market.

For well over a decade now it has been impossible to think of eBay without also thinking of PayPal. True, PayPal has been a subsidiary of eBay since it was acquired in 2002, but the connection in the consumer’s mind was probably more visceral: In order to buy something online at eBay required a PayPal account. On September 30, though, that bond was snapped when eBay announced that it would spin off PayPal, which is set to now become its own publicly traded company in 2015.

Although repeatedly denied by eBay executives over the past year, the move does not come as a major surprise. And the reason it is happening, many speculate, is simple: Mobile payments. Indeed, while PayPal has become the go-to method of online payment, many consumers don’t even consider it when it comes time to make a purchase with a smart phone. Making that transition to become a leader of the quickly evolving mobile payment industry is a huge opportunity. Market research firm eMarketer expects the mobile payments industry in the U.S. to grow to $118 billion by 2018, up from just $3.5 billion this year.

Of course, PayPal is not alone in pursuing this large market. Google Wallet and other mobile payment options like Square have been around for years. Earlier in September, Apple threw its hat into the ring with the unveiling of Apple Pay, the announcement of which included deals with large retailers, such as Whole Foods and McDonalds.

Many observers believe that Apple will provide stiff competition for PayPal. A large measure of its advantage comes from the fact that Apple Pay is incorporated into the iPhone 6 and iPhone 6 Plus, which were purchased by 10 million customers during the first weekend it was available. “Competitors will be forced to counter Apple’s smart phone advantage,” Citicorp analyst Donald Fandetti said in a Bloomberg article. “We see good merchant and consumer adoption over time.”

Still, other observers contend that an independent PayPal will be more able to innovate and come up with mobile payment services and products that will challenge Apple, Google and other competitors. While it’s impossible to predict which individual company will flourish in the mobile payments industry, the sheer level of interest by big brands does indicate that the days of plastic cards are numbered.

October 10, 2014
Consumer Financial Protection Bureau Under Fire For Mismanagement, Discrimination

When it was first established as part of the sweeping Dodd-Frank bill in 2010 the Consumer Financial Protection Bureau (CFPB) was envisioned as something of a white knight – a good guy with some muscle that could help protect American consumers from too powerful Wall Street bankers. But if recent allegations by CFPB employees that have been aired by congressional investigators and in an in-depth story in The Washington Times are true, many of the agency’s own workers need protection themselves.

Among the charges included in The Washington Times story about disgruntled Consumer Financial Protection Bureau workers include those of Ali Naraghi, a bank examiner with the CFPB who claims that he was called a “f’ing foreigner” by superiors when he questioned the methodology used to assess financial institutions. Naraghi, who filed a complaint about his treatment by CFPB supervisors and testified before congress, formerly worked at the Federal Reserve, where he received glowing reviews for his performance. By contrast, Naraghi has received the lowest performance rating possible from his bosses at the CFPB since he joined the agency in 2011, a fact he attributes to his raising concerns about what he considered the lack of objectivity in the CFPB’s methodology.

Other allegations about how the CFPB is run are equally troubling. The Washington Times reports that dozens of agency employees have complained that managers run their departments like “fiefdoms.” “The bureau’s lack of accountability is enabling managers to create their own mini-fiefdoms, stock the ranks of inexperienced and unqualified friends and retaliate against anybody who disagrees with their agenda,” reads the story, written by reporter Kelly Riddell.

Citing internal agency documents, the newspaper also reports that white employees at the CFPB were twice as likely to receive the highest employee rating than black or Hispanic employees. According to Angela Martin, a CFPB enforcement attorney, there is a division of the CFPB referred to as “The Plantation.” “There is an entire section in Consumer Response Intake that is 100 percent African-Americans, even the contractors, and it’s called “The Plantation.” And people tell me it’s very hard to leave The Plantation. You must be extremely savvy, or you must [have] somebody else [help you] to get out,” Martin testified to congress last spring.

For its part, the CFPB says it is working with the union representing its employees to address employee complaints and what are alleged to be systemic problems. At the same time, a CFPB spokesperson told The Washington Times that, on average, a survey of employees shows that the agency’s workers are more satisfied with their managers than federal employees as a whole. According to the survey, nearly 75 percent of employees said they had a high level of respect for the agency’s senior leaders, compared to 54 percent of employees across the entire federal government.

October 5, 2014
Get Financially Fit by Avoiding Rising Overdraft and ATM Fees

Have you ever made a $20 purchase with a debit card and ended up shelling out $50 because you forgot you didn’t have enough money in your account? If you did have to fork over an additional $30 to pay that dreaded overdraft fee, you’re actually a little bit fortunate. That’s because a new study by Bankrate.com pegs the average overdraft fee at $32.74, a new high as well as the 16^th consecutive year the study has found an uptick in the penalty consumers must pay for sending their account into the red. Which all points to the need to avoid overdraft fees in order to remain financially fit.

As part of its 17^th annual Bankrate Checking Survey, the personal finance website surveyed the 10 largest banks and thrifts in 25 of the country’s largest markets. The survey found that overdraft fees also have geographic distinctions. At $34.80, Philadelphia had the highest, while San Francisco had an average fee of $26.74.

Over the summer the Consumer Financial Protection Bureau (CFPB) put overdraft fees in its cross hairs, noting that the median debit card purchase is just $24. When an overdraft fee of $32.74 kicks in – which consumers typically pay within a few days – the CFPB noted that it amounted to a short-term loan with an interest rate of over 17,000 percent.

There are ways to avoid overdraft fees. One is to simply decline overdraft protection, which has the effect of disallowing any purchase you don’t have the funds to cover. Another is to sign-up for email or text alerts that make you aware when your account has dwindling funds. Still another is to use prepaid debit cards, which only allow you to spend the amount of money you’ve pre-loaded into the account. While some prepaid debit cards have overdraft protection, it’s wise to decline it.

The Bankrate survey had more grim news for the users of debit cards. The trend line for ATM fees is similar to that of overdraft charges, with the average cost of using an out-of-network machine reaching a new high of $4.35 per transaction. This charge includes both the fee consumers pay to the owner of the ATM as well as the amount they must pay their own bank for going out of network. As is the case with overdraft fees, location matters. In Phoenix, the average ATM fees were $4.96, while Cincinnati was the lowest at $3.75.

There was some positive news in the study. This year marked the end of a steady decline in the number of free checking accounts available to consumers. In 2009, 76 percent of non-interest checking accounts did not charge a fee, a number that steadily declined to 39 percent by 2013. This year, though, the percentage seemed to stabilize at 38 percent.

October 1, 2014
Helping A Spouse With Ways To Increase Their Credit Score
Anyone who has ever been married knows that a successful union requires plenty of accommodation and teamwork. While that’s an obvious message when it comes to raising children or keeping the house in order, it also extends to maintaining the good credit any couple will need in order to buy a new home or car. This often can mean finding ways to increase a spouse’s credit score. Marital teamwork is especially important if one spouse has a significantly lower credit score than the other. “While married couples don’t inherit each other’s credit score, one partner’s weak rating could sink the family’s financial goals,” writes Farnoosh Torabi in a new article for Money Magazine. Indeed, as the article makes clear, if husband or wife has a FICO score below the mid-700s, chances are the couple will be penalized with higher interest rates should they need to borrow money to purchase a car or a house.

Fortunately, Torabi lays out for couples ways to increase their credit score. They include:
- Paying bills on time: Because your credit score is largely based on whether you pay your credit card and other bills on time, one easy step to take is simply ensuring that happens. Nobody wants to be a nag, so Torabi suggests setting up automatic account alerts to notify your partner when a bill is coming due.
- Don’t be the life preserver: Although it might be tempting to dip into your own savings to erase your spouse’s debt, Torabi notes that doing so might be counterproductive. If your spouse’s debt is the result of poor decisions and reckless spending, giving them a clean slate won’t teach them anything and instead may encourage them to go back to their bad old ways. Instead, she says cutting back household expenses – especially your spouse’s spending – will help pay off the debt and teach valuable lessons.
- Work together: One tool for raising your spouse’s credit score is allowing him or her to become an authorized user on your credit card account. If you together pay your bills on time and in full, both you and your spouse will reap the rewards of a higher credit score.
- Don’t co-sign: While it may be a good idea to add your spouse as an authorized user to your credit card, avoid the temptation of co-signing for his or her new card. Doing that puts you on the hook for whatever debt your spouse incurs, a very bad thing in the event you ever split. Instead, Torabi says to consider encouraging your spouse to get a secured card. Secured cards require an upfront deposit that serves as the account’s credit limit, which means they are easy to obtain. If your spouse can make payments on time and in full he or she will soon see their credit score rise.
September 25, 2014
JP Morgan Chase Aims to Boost Consumer Financial Security

Over the summer CardRatings.com issued a disturbing report that revealed the sorry state of financial literacy among the general population. Despite all of the news about data breaches at Target and Home Depot, fewer than half of those surveyed knew the proper steps to take to monitor and protect their credit – basic steps to maintaining financial security. This lack of understanding, unfortunately, extends beyond just credit issues to the basics of savings and investing and other straightforward elements of financial fitness. Add in the stressed finances of many American families and the predatory practices of payday loan and check cashing outfits and it all adds up to a major problem.

Yet it is one the financial services industry seems increasingly focused on addressing. As part of that effort, JPMorgan Chase & Company announced on Sept. 19 a two-year, $35 million effort to assist individuals and families to save money, build credit and generally improve their financial security. The money will be disbursed in the forms of grants to non-profit organizations that help consumers boost their financial knowledge and that also develop financial products and tools that meet the needs of typically under-served communities.

Indeed, according to JPMorgan Chase, its grants will be targeted to three distinct areas. For one thing, it will be seeking out non-profits that can provide innovative, technology-heavy financial solutions to help meet consumer needs in an affordable way. Understanding that innovative solutions that nobody knows about aren’t useful, grants will also be given to support efforts to expand the availability of these novel solutions. And grantees that seek to disseminate financial best practices will also be considered.

For instance, JPMorgan Chase contributed $150,000 to MoneyThink to help that group develop and app and curriculum to boost the financial literacy of 11^th and 12^th graders. “Chase’s support will help serve an additional 2,000 youth through near-peer mentorship and game-based mobile technologies,” said Ted Gonder, the CEO of MoneyThink.

This latest announcement is a follow-up to JP Morgan Chase’s establishment earlier this year of the Financial Solutions Lab. A five-year, $30 million program in collaboration with the Center for Financial Services Innovation, the lab is centered on developing and distributing innovative products that improve financial security.

September 24, 2014
Apple Pay No Slam Dunk

Apple is not big on subtlety. Its announcement party unveiling the new iPhone 6 and Apple Watch included a mini-concert by none other than U2, whose new album was also given away for free on iTunes, as part of the big rollout. The company’s introduction of Apple Pay, the new digital wallet that will be available to millions of iPhone users, while not quite as flashy, was also significant.

Apple Pay, which will use near field communication (NFC) to allow shoppers to utilize tap and pay technology to purchase items with their phones, was introduced with the news that American Express, Visa and MasterCard had all signed on in support, along with retailers representing 220,000 American stores. “Working with Apple, we’re excited to bring Apple Pay to tens of millions of Capital One customers,” said Frank LaPrade, the Capital One Chief Enterprise Services Officer, in the sort of enthusiastic vote of support that accompanied Apple Pay’s debut. “We are laser focused on the evolution of digital products and services.”

Even though Apple Pay received a big embrace from banks, credit card companies and many retailers, it faces plenty of hurdles before it becomes a mainstream payment option. For one thing, consumers who have been barraged with news about data breaches and thefts could very well be leery of a new payment choice – even if, as Apple points out, it is more secure than debit or credit cards. Retail consultant, Cathy Hotka, was quoted in a recent Forbes story asserting that adoption of Apple Pay would be slow, largely due to uncertainty around security. “A lot of consumers will have to be convinced that their data will remain protected,” she said. “With the choice between shaving off a few seconds and having a safer transaction, consumers will choose safety.”

Another issue is how quickly consumers will upgrade to Apple devices that are equipped with the NFC technology that allows Apple Pay to function. Larry Negrich, a vice president of marketing at nGage Labs was quoted in the Forbes article saying that he expects it to take four years for all iPhone users to have the technology required to utilize Apple Pay. Even when that happens, Negrich notes that will still only account for 50 percent of all consumers. “I think Apple has created a better total solution to the security issue. However what about the other 50 percent of consumer mobile transactions?” he said. “Retailers will surely be faced with supporting Apple Pay and multiple other mobile payment solutions all seamlessly-integrated into their years-old POS (Point of sale) software.”

Ultimately, though, even many of the skeptics about Apple Pay’s immediate adoption think it has great long-term potential. Tom Redd of SAP Global told Forbes that it’s easy to see why Apple will succeed. “Hey, the Millennials live by Apple, and if Apple says, ‘Do it,’ consider it done.”

September 18, 2014