Prepaid Debit Card Reviews, Complaints, Etc

Tag: credit card

Which Plastic Is the Best? Debit Cards, Credit Cards or Prepaid Cards?

Long gone are the days when credit cards were the only choice for people in need of plastic. Here are some other options:

Imagine walking into a restaurant and being told that a menu is not needed because there’s only one dish being served. From time to time that happens — set price, or prix fixe, menus pop up at fancy restaurants and around holidays — but for the most part it would prompt many of us to head for the door. We all like choices.

Major financial institutions, like most restaurants, understand the need to offer different card offerings to meet the varied circumstances and tastes of their customers. As a result, many now offer three card options beyond traditional credit cards. Consumers can choose between secured credit cards, conventional debit cards and prepaid debit cards. Banks are tailoring their cards to meet the needs of different market segments, offering secured cards to young people and others eager to build good credit, issuing conventional debit cards to most checking account customers, and providing prepaid services to those who do not have bank accounts or who have other reasons for wanting prepaid cards. The choices assure almost all consumers can enjoy the safety and convenience of shopping or paying bills with bank or brand imprinted cards. Here’s a bit more about each option.

Secured Credit Cards

An inevitable part of life is to face financial stresses and setbacks. It just happens. And that has especially been the case over the past few years, as the economy has limped along and many have had to contend with lost jobs, lower wages and, often, a resulting damaged credit history. Secured credit cards are intended for people who have had some financial difficulties and thus have trouble qualifying for the sort of unsecured lines of credit typical with a standard credit card. In contrast with standard credit cards, credit building cards or secured credit cards require you to pay a deposit in exchange for borrowing privileges. Think of it this way: rather than the $5,000 or $10,000 limit many credit card companies grant their customers, secured credit cards generally set your limit at whatever amount you can deposit into your account upfront. So, if you open a secured credit card account with $1,500, then you have a credit line of $1,500.

Not all cards have such a strict formula for establishing credit lines, especially after you’ve proven that you reliably pay your bills. Qualifying standards are relatively lenient because that upfront deposit acts as collateral. In exchange, however, you face strict payment requirements and risk substantial penalties and interest hikes if you fail to use your card responsibly. The best secured cards require less than $40 in annual fees and charge less than 18 percent interest. The cards also typically assess late charges. The good news, however, is that prudent use of a secured credit card can help rebuild our your credit rating and help you qualify for an unsecured card (a “normal” credit card).

Conventional Debit Cards

“Free” checking is very seldom completely fee-free. When you open a conventional checking account, the majority of banks issue a debit card as part of their service. You may use a debit card to withdraw funds directly from your checking account on those occasions when you cannot write checks. You can also take advantage of online shopping and bill-paying services, which make spending and tracking your money far easier than writing out checks and combing through your register to balance your account. While conventional debit cards combine the convenience of a credit card with the security of a check, they can often come with fees. More and more banks are charging their customers monthly fees, such as overdraft charges, when they opt to use a debit card.

Prepaid Debit Cards

Prepaid debit cards offer the same convenience as credit and conventional debit cards without the risk of overspending. That’s because prepaid debit cards require consumers to deposit, or load, money into their account upfront. And the amount of money loaded onto the card is all that you can spend. Most prepaid debit cards require no application, and many charge limited or no monthly fees when you meet minimum monthly loading requirements. An increasing number of major financial institutions offer prepaid debit cards that carry all the same consumer protections as their conventional cards, and some are now including Federal Deposit Insurance Corporation (FDIC) protection as well. Consumers, however, must compare prepaid debit cards, because many providers still charge “maintenance” and “inactivity” fees. Mitchell Weiss, co-founder of the University of Hartford’s Center for Personal Financial Responsibility, tells U.S. News & World Report, “These cards prey on the under and unbanked consumers, who mistakenly believe they’re more economical than having a traditional checking account.” Fortunately, we make is simple to compare cards using our in-depth prepaid card analysis.

How to Choose a Card

Because they submit regular monthly reports to the three major credit bureaus, secured credit cards help you establish, restore or improve your credit. Tied to your checking account, conventional debit cards make routine transactions more convenient. Retailers and service providers typically accept debit cards even when they do not accept personal checks, and conventional debit cards make online shopping easy. With most conventional debit cards, however, you run the risk of overdraft penalties. For many families, prepaid debit cards can be a good choice, because they offer the convenience of credit and conventional debit cards while they make sure you stay on your budget. If you want to shift your family to a “cash only” economy, prepaid debit cards can be a good step in that direction.

No single card is the best choice for everyone. Your best choice depends on your financial situation and objectives. Many credible online sources provide tools for comparing cards and calculating which best satisfies your needs. And picking a card doesn’t have to be an either-or proposition; many families choose to carry and use one of each.

Originally posted on Huffington Post

May 30, 2014
Qantas Lets Fliers Earn Miles With Prepaid Card

The marriage of airline miles and plastic has lasted for a long time. For years carriers like Southwest Airlines, American, and United have aggressively marketed their own branded credit cards, using the promise of free trips to exotic locales to encourage travelers to charge everything from their rent to a cup of coffee on their credit cards.

Given that prepaid debit cards have traditionally been the domain of the unbanked – not exactly a group of frequent fliers – airlines have not pushed their use as a way to earn points. In Australia, however, that has changed. Qantas Airlines, that country’s major carrier, is now pushing its Qantas Cash card, a prepaid debit product.

The way the card works will be familiar to anyone who has used a prepaid debit card. Like similar products in the U.S., the Qantas Cash card requires users to load money upfront before they start spending. Once cash is in the account, consumers can use their Qantas Cash card wherever MasterCard is accepted. Because it serves as the membership card for Qantas frequent fliers, it can sometimes even serve as a boarding pass.

But the big attraction with Qantas Cash is that, like a branded airline credit card, it allows users to rack up points, which they can redeem for travel or other products. For purchases Qantas Card holders make in Australia, for instance, they earn one point for every $2 they spend. For purchases made internationally – or even from websites outside of Australia – cardholders earn one point for each $1 spent. For really serious travelers, the Qantas Card has another perk. Anyone planning a trip can purchase currency to be loaded onto their Qantas Card at a currency rate that is locked in when they buy it.

A quick search of U.S. carriers did not turn up any similar points-earning prepaid debit cards. With prepaid cards becoming more mainstream each day, it seems only a matter of time before demand for them here takes off as well.

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May 14, 2014
Job Corps Debit Card Use Squanders Millions

A new report from the Department of Labor’s Office of Inspector General concluded that prepaid debit cards issued by the Job Corps were misused to the tune of millions of dollars. The Job Corps is a federal agency that provides vocational training and education for young people, especially those deemed to be disadvantaged.

As part of the mission to better prepare young people for employment, the Job Corps picks up the tab for certain travel expenses, including checked baggage fees and meals. In order to cover those expenses, the Job Corps issues prepaid debit cards to the young people it assists. In the period between July 2011 and June 2012, the Job Corps purchased over $21 million via prepaid cards in order to pay for travel and other expenses for young people traveling to and from 125 Job Corps centers across the country.

The Office of Inspector General’s report details widespread misuse of the cards distributed by the Job Corps. In particular, the audit found that the prepaid cards were being used to purchase personal items and to pay for unnecessarily expensive travel. In addition, the report found that hundreds of thousands of dollars were squandered because the government paid excessively high fees associated with prepaid cards and because numerous cards had balances that remained unused. In total, the Office of Inspector General determined that $5.1 million in Job Corps funds had been misused.

The investigation was launched in May of 2012, after allegations surfaced that a Miami Job Corps employee had used hundreds of prepaid cards meant for young people to make personal purchases. The audit was launched in order to answer this question: Were all student travel expenses claimed by Job Corps centers allowable and in accordance with applicable policies and requirements?

The answer to that question was a resounding no. The Office of Inspector General report recommends that the Labor Department’s Assistant Secretary for Employment and Training, who oversees the Job Corps, require new internal controls to ensure that public money is no longer misappropriated.

May 9, 2014
Data Breach Forces Target CEO Out

It was just too much to recover from, in the end. On May 5, Target announced that Gregg Steinhafel, the company’s president, CEO and chairman of the board of directors, would resign immediately. The move ended a three-decade-plus career at the retailer as well as a months-long effort to lead Target beyond the many problems that crept up after a data breach impacted tens of millions of customers last December. Target’s chief financial officer, John Mulligan, was appointed interim president and CEO.

In a statement that lauded Steinhafel’s long tenure at Target, the company’s board made it clear that it was time for a change. “After extensive discussions, the board and Gregg Steinhafel have decided that now is the right time for new leadership at Target,” says the statement. In its statement, Target also said that Steinhafel not only led the response to the data breach but also held himself “personally accountable and pledged that Target would emerge a better company.”

Some observers believe that, even though his continued leadership proved unworkable, Steinhafel has done just that. In an article on MarketWatch, writer Philip van Doorn said it was ironic that Steinhafel was being ousted because of the ongoing impact of the data breach even though Target is “leading the way in upgrading payment security for consumers.”

Indeed, as van Doorn points out, Target announced last month that its efforts to implement far superior chip-and-PIN technology for its store-branded credit cards will be completed by early 2015. “In addition to implementing chip-and-PIN verification for its store-branded cards, Target will complete the installation of devices for the use of chip-and signature and chip-and-PIN verification for non-Target credit cards in September, with the software in place in early 2015,” writes van Doorn.

May 6, 2014
11 Ways to Raise Your Credit Score, Fast

By Curtis Arnold and Donna Freedman

A recent survey from the National Foundation for Credit Counseling indicates that more people would be embarrassed to admit their credit scores (30%) than their weight (12%).

While crash diets don’t usually work and can be unhealthy, it is possible to change your credit score fairly quickly. But just as with weight loss, “quickly” is a relative term. Seeing any improvement could take 30 to 60 days, according to Liz Weston, personal finance columnist and author of “Your Credit Score, Your Money & What’s At Stake.”

But nothing will change at all if you just sit there on the couch, eating Cheetos and charging items on the Home Shopping Network. So get moving!

The first thing to do is get a copy of your credit report from AnnualCreditReport.com. The three major credit reporting bureaus must give you one free copy per year, so plan to order one every four months. Another great resource is WisePiggy which provides a truly free credit score, advice and information, all with no strings attached.

Then use one or more of the following tips to boost that three-digit number that has increasing power over our everyday lives.

1. Dispute errors. Mistakes happen. You can dispute errors online through Equifax, Experian and TransUnion. After you’ve fixed any foul-ups, you might try to…

2. Negotiate. You can’t deny that you stopped paying a credit card bill when you were unemployed last year. But you can ask creditors to “erase” that debt or any account that went to collection. Write a letter offering to pay the remaining balance if the creditor will then report the account as “paid as agreed” or maybe even remove it altogether. (Note: Get the creditor to agree in writing before you make the payment.)

You might also be able to ask for a “good-will adjustment.” Suppose you were a pretty good Visa customer until that period of unemployment, when you made a late payment or two – which now show up on your credit report. Write a letter to Visa emphasizing your previous good history and ask that the oopsies be removed from the credit report. It could happen. And as long as you’re reading the report, you need to…

3. Check your limits. Make sure your reported credit limits are current vs. lower than they actually are. You don’t want it to look as though you’re maxing out the plastic each month. If the card issuer forgot to mention your newly bumped-up credit limit, request that this be done.

4. Get a credit card. Having one or two pieces of plastic will do good things to your score – if you don’t charge too much and if you pay your bills on time. In other words, be a responsible user of credit. Look for the best deals on CardRatings.com.

Can’t get a traditional card? Try for a secured credit card, taking care to choose one that reports to all three major credit bureaus. And if you can’t get a secured card, you might ask to…

5. Become an authorized user. This means convincing a relative or friend to be added to his or her existing credit card account. If you’ve had a checkered financial history, don’t be surprised if you hear the word “no” a lot. But you might luck out, especially if you’re a young person who has no history of poor credit use.

Offer to put an agreement in writing stating how much you can spend and how you will get your share of the bill to the cardholder. Then “do your part and use the card responsibly,” says Beverly Harzog, author of “Confessions of a Credit Junkie.” In other words, don’t buy more than you can afford and don’t leave your co-signer hanging when the bill is due. The point is to learn to use credit responsibly.

6. Under-use your cards. Yes, we did just tell you to get credit by any means possible. But don’t whip out the plastic to pay for everything. The “credit utilization ratio” should be no more than 30% and ideally even less. Harzog says that a 10% credit utilization ratio will “maximize this part of your FICO score.”

For example, suppose your Mastercard has a $1,500 limit and you routinely charge a grand a month. It doesn’t matter if you pay it all off before it’s due. What matters is the credit bureaus think “Curtis is using two-thirds of his credit! What a spendthrift!” And if you’re a cash-free kind of guy? Then try to…

7. Raise your credit limit. Ask your creditors to increase your limit, i.e. making that Mastercard good for up to $3,000. Be careful with this one, though: It works only if you can trust yourself not to increase your spending habits accordingly. Otherwise you’ll be right back to using 66% of your credit each month and how will that look?

8. Don’t close any cards. Canceling a credit card will cause your available credit to drop, which doesn’t look good to a bureau. One way to keep a card active is to use it for a recurring charge such as a utility bill. There’s room for that in your budget, right?

9. Mix it up. Using a different kind of credit can make for a modest boost to your score. For example, you might take out a small personal loan from the credit union or buy a piece of furniture or appliance on installment (but only if you’re 100% sure you can and will meet the payment schedule).

10. Pay your bills on time. Seriously. Your payment history – including the ones you pay late or skip altogether – makes up a whopping 35% of your FICO score. If you’re absent-minded or merely overwhelmed (Hi there, parents of young children!), then for heaven’s sake, automate your payments. Even better than paying on time is to…

11. Pay your bills twice a month. Using too much of your credit limit at any given moment doesn’t look good. Suppose your limit is $3,000 and a month’s worth of havoc (car repair, doctor bills, plane ticket for kid to get to college) means you’ve charged up $2,9000. Sure, you plan to pay in full by the 18^th of the month – but until then it looks like you’re maxing out yet another card.

Instead, make one payment just before the statement closing date and second one right before the due date. The first will likely reduce the balance that the credit bureaus see and the second makes sure you won’t pay interest or a late fee.

(Curtis Arnold regularly writes and blogs about credit, debit and related personal finance topics and founded CardRatings.com and BestPrepaidDebitCards.com, which provides advice and rates and reviews credit cards, prepaid debit cards and related products. He is a regular Forbes contributor and is regularly featured by national media outlets including The Wall Street Journal, The Today Show and Good Morning America for his expertise in the credit industry.

Donna Freedman writes about personal finance for Money Talks News and other websites and magazines, and blogs at DonnaFreedman.com.)

May 5, 2014
The Comeback Card – Secured credit cards offer a helpful route to the real thing

The horror stories about credit cards are real. Far too many people have used them irresponsibly and dug themselves a deep, deep financial hole that takes years or decades to get out of. But those unfortunate tales shouldn’t overshadow the very real fact that credit cards have revolutionized how we live, arguably doing for commerce what the automobile did for travel and what the mobile phone has done for communications. Just imagine the pre-credit card days when travel, shopping or going to a restaurant meant carrying around a wallet full of cash or traveler’s checks.

These days, in the wake of the financial crisis – which both spawned tougher regulations and prompted banks to be circumspect about extending credit – many people simply can’t get a credit card. While that is probably a good thing overall, it means that people who have a poor credit history or are simply too young to have established a credit history cannot take advantage of the many real benefits of having a credit card in their wallet. That is, unless they opt to obtain a credit building card, aka as a secured credit card, and begin a journey to obtaining a full-fledged credit card.

What’s ‘Secured’ About It?

A secured credit card comes with a string attached, a fairly big string. To get a secured card, you have to put up some money.

This protects the bank or credit union that issues the card. Fair or not, if you have shaky credit, you’re considered a high-risk customer. To reduce that risk, the bank requires you to deposit a certain amount of money for security. If you can’t repay what you owe on the card, the bank can take money out of that account to cover itself.

The Payoff Down the Road

A secured credit card is like training wheels on a bicycle. It’s meant to get you to a place where you no longer need it. The goal is for your secured card to evolve into a regular credit card, cutting the string and eliminating the need for the security deposit.

When you have a secured card, you’re under a microscope. Think of it like getting a try-out on a baseball team; the coaches want to see how you perform before giving you a slot on the roster. In the same way, the bank keeps track of how you handle your account, and so do the three major credit bureaus, which are Equifax, TransUnion and Experian (not all secured cards report to the bureaus). While you get some of the albeit limited benefits of a full-on credit card, you’re able to show that you pay off your bill on-time.

Beverly Harzog, an independent credit card expert and author of the forthcoming book “Confessions of a Credit Junkie,” says a secured card “is a great way to rebuild or establish credit.” But she adds: “The key is to use the card responsibly.”

Plastic Look-alikes

Because you have to deposit money before you can use a secured credit card, it may sound to some like a debit card, especially a prepaid debit card. But it’s very different.

A debit card draws money directly from the user’s bank account to make purchases. Using one is like writing a paper check. There’s no credit involved. A prepaid debit card takes this one step further, letting you access funds without even having a bank account. The customer “loads” and “reloads” the card with money (there are various ways to do this) and spends as needed.

If you simply want the speed and convenience of paying with plastic, debit cards are handy. But because they don’t involve credit, they do nothing to build your credit score. The secured credit card has that niche pretty much to itself.

How to Apply

Because banks face limited risk, they’re fairly receptive to an applicant for a secured credit card, assuming the person has money to deposit. Still, not every application gets a green light. For instance, a recent bankruptcy may limit a person’s eligibility and an especially reckless use of credit in the past may scare banks off.

Offers for secured cards are everywhere. The important things for consumers are to find one that is issued by a reputable lending institution (an FDIC-insured bank or NCUA-insured credit union), choose an affordable sum to deposit, and to compare secured card offers.

Deposits for secured cards range from the low hundreds of dollars to more than $5,000. A card’s credit limit is tied to the size of the deposit.

The deposit amount and credit limit are not always the same, though. In a few instances, the deposit is more than the credit line. And there are a few “partially secured credit cards” that offer a higher limit than the amount deposited. “This is a little riskier for the issuer,” Harzog notes. Banks will provide more leeway to applicants it deems to be less of a financial risk.

Fees, Interest and the Finish Line

As is the case with any financial product, shoppers considering a secured credit card should look for ones that have fees that are as few and as low as possible. While annual fees are common with secured cards, a good secured card will not have an annual fee in excess of $35 or so.

Even the best deal on fees (no fees at all) will do you little good if you’re stuck with an outrageous interest rate. You have to balance the two factors, look at the big picture and do the math. That being said, a good secured credit card should not charge more than 19 percent annual interest.

For most applicants, the important part of having a secured credit card is the end game. When will their card become a regular credit card? Harzog, the credit card expert, cites 12 to 18 months as the average period, “if [the card is] used responsibly.” But she adds the caveat: “The specifics of each person’s credit file will be a factor.”

A Helpful Tool

Being shut out of the credit market is a difficult situation. But getting a secured credit card shows lenders that you’re a serious person, willing to bet your own money that you can handle your obligations. And it allows you to prove yourself month by month. This financial tool has helped millions of people to establish or rebuild their credit and, in so doing, helped them get on the path to financial freedom.

May 2, 2014