Credit and Debit Card Ratings

Money Management Made Easy Using Prepaid Debit Cards

How prepaid debit cards can help keep you on budget and in control of your finances

They’re the kind of stories that make people shake their heads in disbelief. Layered with no small amount of schadenfreude, these are the tales of talented athletes whose prowess on the field and court earn them both adulation from fans and millions of dollars per year. Yet somehow, through horrific spending habits and bad advice, all of those millions disappear. ESPN recently aired a documentary, appropriately titled “Broke,” chronicling the commonplace financial problems of once wealthy athletes, which included a stunning list of athletes who have declared bankruptcy: names like Mike Tyson, Dorothy Hamill, Derrick Coleman, Bill Buckner and many, many more.

While it’s easy enough to cluck disapproval about the profligate ways of pampered sports stars, the unfortunate reality is that the bad financial habits that lead people like Terrell Owens to go broke are just as common among the less well known and well paid among us. And in fact, while there may be less zeros involved with the debts, there are plenty of people who chronically spend more than they make. One of the main culprits that allow that sort of bad behavior to spiral out of control, of course, is the credit card. Indeed, convenient and necessary as they might be, credit cards are all too often the bane of sound money management.

This all may sound like familiar territory, but given the rampant problem of indebtedness in this country it’s worth revisiting. As anyone who has ever had one knows well, credit cards have a limit, the maximum amount you can charge. But let’s be honest: credit card limits aren’t individually tailored to your financial situation and there are rarely instances when people can afford to bump up against their credit limits. And if you’ve reached that point, you’re already doing damage to your credit, a signal to lenders that they should jack up the interest rate they charge you on mortgages and car loans because you just might not have the money to repay them.

Sometimes, good money management – which, in the end, is all about not spending more than you have – requires a little tough love. Which is where prepaid debit cards come in. The reason prepaid cards won’t get you into the kind of trouble a credit card with a high limit can is deceptively simple: there’s no borrowing (that is, credit) involved. In other words, a prepaid debit card forces you to live within your means because it only allows you to spend money that you have already earned and used to fund, or load, the card. You can’t put money on the card unless you have the money in the first place. In a way, it’s like awarding yourself an allowance.

There are other ways a prepaid debit card aids the money manager lurking somewhere inside us all. Knowledge truly is power when it comes to managing your finances. For one thing, you can easily keep track of your prepaid card balance online or on your smart phone. A prepaid card can also be an enormous help in crafting a family budget. Take the time to review a month’s spending on your prepaid card. Who knew you were spending $10 a week on sodas? Well, now you do, and that knowledge should help you devise a budget that reflects your priorities.

There are other, less obvious ways that a prepaid card can help with money management. Cash flow is an important aspect of sound finances and prepaid debit cards can be helpful in aiding the swift delivery of income tax refunds for those who don’t have bank accounts. According to the Federal Deposit Insurance Corporation (FDIC), about 30 million American households don’t have bank accounts. If someone has a bank account and opts to get their refund deposited directly, they can expect to wait about two weeks from the time they file their return. But if they have no choice but to wait for a paper check, it takes 6 to 8 weeks for a refund to arrive. By contrast, people with prepaid cards, whether they have bank accounts or not, can get their tax refund deposited almost immediately, eliminating the need for any more refund-anticipation loans.

Prepaid cards aren’t perfect, of course. And while prepaid debit card issuers charge fees, you can still get a card with minimal fees by shopping carefully. “Some prepaid debit cards are loaded with fees than can often resemble a minefield. There are, however, prepaid debit cards that have very few fees. Comparison shopping for prepaid debit cards is more important than almost any other financial-services product because you can, in fact, save hundreds of dollars each year by choosing a fee-friendly version,” says John Ulzheimer, president of consumer education at SmartCredit.com.

Who knows, if Terrell Owens or Bernie Kosar or any of the other athletes who have had financial problems had been using prepaid debit cards they might be remembered today only for their athletic achievements.

Author: Chris Warren

  • Money Management Made Easy Using Prepaid Debit Cards

    Money Management Made Easy Using Prepaid Debit Cards

    How prepaid debit cards can help keep you on budget and in control of your finances

    They’re the kind of stories that make people shake their heads in disbelief. Layered with no small amount of schadenfreude, these are the tales of talented athletes whose prowess on the field and court earn them both adulation from fans and millions of dollars per year. Yet somehow, through horrific spending habits and bad advice, all of those millions disappear. ESPN recently aired a documentary, appropriately titled “Broke,” chronicling the commonplace financial problems of once wealthy athletes, which included a stunning list of athletes who have declared bankruptcy: names like Mike Tyson, Dorothy Hamill, Derrick Coleman, Bill Buckner and many, many more.

    While it’s easy enough to cluck disapproval about the profligate ways of pampered sports stars, the unfortunate reality is that the bad financial habits that lead people like Terrell Owens to go broke are just as common among the less well known and well paid among us. And in fact, while there may be less zeros involved with the debts, there are plenty of people who chronically spend more than they make. One of the main culprits that allow that sort of bad behavior to spiral out of control, of course, is the credit card. Indeed, convenient and necessary as they might be, credit cards are all too often the bane of sound money management.

    This all may sound like familiar territory, but given the rampant problem of indebtedness in this country it’s worth revisiting. As anyone who has ever had one knows well, credit cards have a limit, the maximum amount you can charge. But let’s be honest: credit card limits aren’t individually tailored to your financial situation and there are rarely instances when people can afford to bump up against their credit limits. And if you’ve reached that point, you’re already doing damage to your credit, a signal to lenders that they should jack up the interest rate they charge you on mortgages and car loans because you just might not have the money to repay them.

    Sometimes, good money management – which, in the end, is all about not spending more than you have – requires a little tough love. Which is where prepaid debit cards come in. The reason prepaid cards won’t get you into the kind of trouble a credit card with a high limit can is deceptively simple: there’s no borrowing (that is, credit) involved. In other words, a prepaid debit card forces you to live within your means because it only allows you to spend money that you have already earned and used to fund, or load, the card. You can’t put money on the card unless you have the money in the first place. In a way, it’s like awarding yourself an allowance.

    There are other ways a prepaid debit card aids the money manager lurking somewhere inside us all. Knowledge truly is power when it comes to managing your finances. For one thing, you can easily keep track of your prepaid card balance online or on your smart phone. A prepaid card can also be an enormous help in crafting a family budget. Take the time to review a month’s spending on your prepaid card. Who knew you were spending $10 a week on sodas? Well, now you do, and that knowledge should help you devise a budget that reflects your priorities.

    There are other, less obvious ways that a prepaid card can help with money management. Cash flow is an important aspect of sound finances and prepaid debit cards can be helpful in aiding the swift delivery of income tax refunds for those who don’t have bank accounts. According to the Federal Deposit Insurance Corporation (FDIC), about 30 million American households don’t have bank accounts. If someone has a bank account and opts to get their refund deposited directly, they can expect to wait about two weeks from the time they file their return. But if they have no choice but to wait for a paper check, it takes 6 to 8 weeks for a refund to arrive. By contrast, people with prepaid cards, whether they have bank accounts or not, can get their tax refund deposited almost immediately, eliminating the need for any more refund-anticipation loans.

    Prepaid cards aren’t perfect, of course. And while prepaid debit card issuers charge fees, you can still get a card with minimal fees by shopping carefully. “Some prepaid debit cards are loaded with fees than can often resemble a minefield. There are, however, prepaid debit cards that have very few fees. Comparison shopping for prepaid debit cards is more important than almost any other financial-services product because you can, in fact, save hundreds of dollars each year by choosing a fee-friendly version,” says John Ulzheimer, president of consumer education at SmartCredit.com.

    Who knows, if Terrell Owens or Bernie Kosar or any of the other athletes who have had financial problems had been using prepaid debit cards they might be remembered today only for their athletic achievements.

  • Death, Taxes and Lost or Stolen Debit Cards

    Death, Taxes and Lost or Stolen Debit Cards

    Sadly, losing or having your debit card stolen is commonplace these days. Here’s what to do if it happens

    The stories come out with the consistency of quarterly earnings reports. From Barnes & Noble to HSBC Bank to Zappos, thieves eager to get their hands on customer data are consistently, and successfully, targeting large companies. And for once, this is definitely a case where the news media can’t be accused of sensationalizing a trivial problem. Indeed, just check out these disturbing facts about the prevalence of identity theft.

    A Growing Scourge

    • Identity theft is the fastest growing crime in America.
    • According to the Federal Trade Commission, there are almost 10 million cases of identity theft annually.
    • About 19 million people fall victim to identity theft every minute.
    • Each crime costs the average victim $500 and 30 hours to resolve.
    • A family member or relative, according to one study, perpetrates 32% of identity thefts. The culprits in 18% of cases are friends, neighbors or in-house employees.

    Source: TransUnion: Identity Theft Facts:  http://www.transunion.com/personal-credit/identity-theft-and-fraud/identity-theft-facts.page

    An Ounce of Prevention

    While it’s the big brand names whose security has been breached who get the headlines, the real victims are the customers whose credit and debit card information have been pilfered. What’s even more insidious about the problem is that in many, many instances your physical card will still be snug in your wallet or purse. The upside of our highly digital world is that we can sit in our pajamas and order books, paint, DVDs and steak knives from online retailers like Amazon or Wal-Mart without handing over our debit card to a clerk. The downside, of course, is that when crooks get access to our account details, they can do exactly the same thing.

    Obviously, the question is what to do should your debit card information fall into the hands of a criminal. But herein lies one of the most vexing problems with identity theft: if you still have possession of your debit card, how in the world will you even know that a criminal has struck? Well, it might sound a bit like your mother telling you to eat your vegetables, but the Federal Trade Commission offers up a slew of tips on how to minimize what can be significant damage caused by identity theft. Here are just a couple of their ideas:

    • Check your ATM or debit card transactions. Unless you’re Paris Hilton or Nicolas Cage, you likely know how you spend your money. If there’s a fishy looking charge, look into it. “The more often you check it the better,” says Dr. Mary Ann Campbell, a CFP who teaches personal and family finance at the University of Central Arkansas and runs the web site www.moneymagic.com. “With free programs such as mint.com, you are able to check balances daily on a smart phone.”
    • Don’t help the criminals. This may sound painfully obvious, but never give your account information over the phone unless you’re the one who has initiated the call. And never, ever respond to an email asking for your account details for verification purposes. Credible companies simply don’t do this.
    • No carte blanche. Never, ever sign a charge or debit slip that is blank. The amount that someone fills in afterwards may shock you.

    Source: http://www.consumer.ftc.gov/articles/0213-lost-or-stolen-credit-atm-and-debit-cards

    As the federal agency that seeks to protect consumers from identity thieves, the Federal Trade Commission maintains a treasure trove of information about the problem and provides lots of helpful tips to prevent or respond to it. So by all means, visit the FTC website.

     

    When it Happens

     

    There is one sure-fire way to avoid being a victim of identity theft: live in a cave and cut up your debit cards. For the rest of us, even the most hardcore preventative measures won’t eliminate the risk – that is, unless you can somehow fortify the data storage of every single retailer you’ve ever done business with.


    With that unfortunate reality in mind, remember that how you respond will largely determine just how damaging and costly identity theft will be. The most important thing to remember is to report the loss of your debit card immediately to the bank. For this very reason, banks have 24-hour emergency phone numbers. If you determine your card was stolen at 2 a.m., you are better off reporting the card stolen then. Who could sleep, anyway? “Act fast! Be prepared like a good boy or girl scout and already have a copy of your debit card front and back,” says Campbell. “Or your debit card information copied in your phone or computer, particularly the 800 number to contact to let them know the card has been lost or stolen.”

     

    Even though calling in the middle of the night can be a hassle, waiting until morning could allow for numerous unauthorized charges and make an already big mess more difficult to clear up. What else can you do? Try these steps:

    Grab your laptop. You should log into your online bank account as soon as you can and carefully review all debit card activity. Since transactions are typically reported immediately, all the fraudulent charges should already be posted. Take note of each and every one so that you can report them to your bank. (Note: If the merchant put the transactions through as credit instead of debit, they may not appear right away).

    Be a pain. There are times in life when it makes sense to be polite and reserved. This is not one of those times. Follow up with your bank daily until the issue is 100% resolved. As Dave Ramsey may say on his radio show, “Make calling the bank your job.” You may also hear him say to “make calling the bank your goal in life.” In other words, call the bank every day, even multiple times a day until the issue is resolved to your satisfaction. The bank will close your debit card account and issue you a new card. But until all the fraudulent charges are removed, you should stay in close contact with your bank. Along the way keep meticulous records of emails, correspondence and phone calls, including the name of the person at the bank you spoke to.

    See if you’re covered. Dust off your renters or homeowners insurance policy and read the fine print — some policies cover card theft. And for future reference, keep the fact that some policies do cover it in mind and consider adding it to your policy.

    Know Your Rights

     

    While it’s important to act thoroughly and fast if your debit card is stolen, it is also important to arm yourself with knowledge about your rights under the law. The most important thing to know is that, under federal law, your liability is limited, although your level of protection against unauthorized charges varies. It depends on the type of card used and how quickly you report the loss. The difference can be substantial. Early reporting can limit your loss to $50. But, after two days, the maximum loss allowed jumps up to $500.

     

    To be more specific, the federal laws that offer consumer protection when your debit card is lost or stolen are the Fair Credit Billing Act (FCBA) and the Electronic Fund Transfer Act (EFTA). Not only is FCBA the reason your liability for unauthorized charges capped at $50, it also says that if you report the card lost or stolen before it’s ever used, you won’t be liable for any charges whatsoever. When it comes to your debit card, EFTA protects you from some liability. If the card is used before it’s reported lost or stolen, uh-oh, you may have some inescapable losses. Here’s what you could be out of pocket:

     

    HOW QUICKLY YOU REPORT THE PROBLEM YOUR MAXIMUM LOSS
    Before any fraudulent transactions have been made $0
    Within two business days $50
    Two to 60 business days later $500
    More than 60 business days later All the money taken from your ATM/debit card

    Source: http://www.consumer.ftc.gov/articles/0213-lost-or-stolen-credit-atm-and-debit-cards

     

    There is a caveat to all this. If your debit card number is used, but the card itself isn’t stolen, you have 60 days to report the charges as fraudulent.

     

     

     

Credit and Debit Card Ratings