What is a prepaid credit card?

What do you do if you have poor credit or you don’t have a bank account? These items are needed for many important transactions, such as making hotel reservations or online purchases. If you have poor credit, you will be turned down quite often for loans, and any loan you receive will have a high interest rate. In a world where money transactions are primarily done electronically, it is crucial to have some sort of plastic. If you’re trying plastic for the first time, you may try getting a prepaid credit card.

A prepaid credit card is much safer than a regular unsecured credit card. You might have heard the term “secured credit card,” and, while the two names are often used interchangeably, they are not the same. They both entail actual money placed in a prepaid credit card account. To get one, you deposit an amount of money, and you can then use the card to make similar transactions as a regular credit card. On a prepaid credit card, there are no interest charges or late fees, and you will also get a monthly statement, but not a bill; therefore, a prepaid credit card is more closely related to a debit card linked to a checking account. With a secured credit card, however, you will have monthly payments, as well as interest charged on any outstanding balance.

Most prepaid credit cards will come with a small set-up fee, and some may also have transaction fees when you make purchases. There may also be fees of a couple dollars each if you use your prepaid credit card at an ATM or when you deposit more money onto the account. One specific card, the “Mango MasterCard” prepaid card, will waive its monthly fee if you deposit at least $500 per month. Some other cards, like the Green Dot MasterCard, will waive fees if you make a specific number of purchases per month. You may be able to find some cards without these fees, so shop around before getting one.

Anyone can get a prepaid credit card, but it will not actually help to improve your credit rating. A secured credit card will do the trick, so if you’re trying to get better scores from Equifax, Experian, and TransUnion, go after a secured credit card. A prepaid credit card appears to be a combination of a debit card and a credit card. It simply acts as an alternative during certain purchases where a debit card might not be accepted, like hotel or flight bookings. While a prepaid credit card may not be able to improve your credit score, it may be a way for you to learn how to manage your funds electronically, and it can be a good introduction into the hybrid world of cash and plastic.

Credit Card Fees and How to Avoid Them

Here’s how to avoid credit card fees without too much hassle.

Banks like money, fees make money, banks like fees. That’s what makes the world turn, but if you can be vigilant and avoid these fees, you’ll need to get a bigger mattress to stuff all this extra cash under. Here’s a list of the different ways banks try to drain you dry and different ways to avoid them.

Annual fees, balance transfer fees, foreign transaction fees, late payment fees…the list goes on. Most of these fees can be avoided up front when shopping for a credit card. Annual fees are the easiest to avoid, just don’t sign up for a credit card with an annual fee. If you’re looking to transfer a balance, look for a card with a promotional balance transfer period with no fee attached. Certain rewards cards that are marketed towards travelers waive foreign transaction fees altogether.

One of the easiest fees to avoid, but for some people also the hardest, are late fees. For those (including myself) that can be a little forgetful at times, it helps to set a reminder on your phone or your computer to pay your bill on time, or even better, even early. Avoid mistakes on the banks end by paying it a few days ahead of time, then there should be no excuse why your payment wasn’t processed.

Another way to get bitten by the fee bug is exceeding your credit limit. Always keep in mind where you are at with your credit card spending and try not to go over 30 percent of that number. Not only will this keep you far away from exceeding it, it will also bode well for your credit score.

And lastly, make sure the account your paying your credit card off with has sufficient funds. This might sound obvious, but always double check which account you’re paying for and with what money, because if you overdraw you’ll not only be slapped with a fee on your checking account, but a return check fee on your credit card as well.

Avoid these certain pitfalls and along with common sense, you’ll be pocketing cash instead of shelling out even more.

Five Credit Card Tips for College-Bound Millennials

It’s that time of year again. A summer full of partying, baking in the sun, and maybe even a job (heaven forbid) is coming to a close for hundreds of thousands of college-bound Millennials.

Retail companies love them because they are prepping for the big move by spending, or convincing their parents to spend, millions on MacBooks, iPods, iPhones, furniture, and the latest in trendy clothes. It’s no secret that credit card companies love them too. On-campus events are filled with local banks and credit card issuers giving away free subway sandwiches, glow-in-the-dark pens, and floating keychains just to attract their business.

You may wonder why credit card companies are so interested in targeting a demographic that statistically has minimal income and a lot of debt while in school? The main reason is these consumers are generally lifelong customers who will keep spending and spending, even when they have nothing to spend. It’s a proven fact that the first card in a student’s wallet will stay there for a very long time, and even if they do default, parents are often willing to step up and bail them out.

56% percent of undergraduates get their first credit card at the age of 18, and 91% of students have at least one card by their senior year. The average outstanding balance on undergraduate credit cards was $4,169 in 2010, and that number continues to increase at a dramatic rate each year. Add the credit card debt on top of students loans and Millennial students are beginning their lives in the “real world” in a real deep hole of debt.

The problem is most college students get their first credit card at the young age of 18, but many have never been taught how to properly manage credit and establish a solid credit score. It’s not taught in High school classes, and parents often fail to teach their children the importance of credit and its role in their financial future. There certainly aren’t any step-by-step directions in the credit card application either. As a result, tens of thousands of college graduates enter the workforce each year with a lot of debt, poor credit scores, and a rude awakening when they apply for a loan on their first car, condo, or home.

If you are a college-bound Millennial, or a parent of one, keep the following five tips in mind as you head off to freshman orientation this year. They will not only save you from headaches later on, but they will also save you a lot of money.

1. Beware of freebies with strings attached

Nothing is better than free stuff. But if you have to fill out a card with personal information before they give it to you, you’re better off moving onto the next booth. Don’t fall prey to a free sandwich that will reward you with an unexpected credit card in the mail two weeks later. You’re smarter than that.

2. Don’t sign up on the spot – Do your research online!

There are many reputable companies providing excellent cards for students at on-campus events; however, signing up on the spot is generally not a good idea. Take the informational pamphlets home with you, and then do a little online research to find the best possible card. The online credit card marketplace provides consumers with more power than ever to compare and contrast the best offers in the industry and apply securely online in about 60 seconds.

3. One card is enough

Once you have found the perfect student card, keep life simple. One credit card is enough for a college student. Set up your account online, keep your credit utilization under 30% of the credit limit, and pay off your balance each month. If your limit is too low at first, use cash or a debit card to pay for anything that would take you above the 30% threshold. When you are prepared to responsibly manage a higher credit limit, call your credit card issuer and they will likely be happy to increase your limit.

4. Imagine you never heard of a Cash Advance

If you ever need quick cash, your credit card is generally not a good option. Forget about it. Interest rates for cash advances could be up to 30%, which is highway robbery. Sell old textbooks back for cash, throw something you never use on craigslist at discounted price, or call good-ole Mom and Dad to give them the sob story. Anything is better than paying 30% on a cash advance.

5. Educate Yourself

An integral part of every college student’s education should be developing an in-depth understanding of consumer credit and how it will affect their personal financial future. Take 15 minutes to browse the net and provide yourself with an important education you won’t receive from even the best Ivy League schools.

Getting a secured credit card can build or rebuild credit

Negative information on your credit report can destroy your credit. Charge-offs, settlements, and foreclosures can stay on your report for seven years, hurting your chances of getting a low interest rate on any new loans you might get. As your settlements and charge-offs get older, their negative impact on your report shrinks. You might be able to ask the credit bureaus to remove the bad stuff, but this typically happens only when the information is incorrect. There is an alternative way to recover from poor credit other than pleading with the credit bureaus.

It might not seem logical, but opening a new credit account can boost your score. If you’re looking for a way to dig yourself out of a poor credit morass, consider a secured credit card. A secured credit card can be obtained with a deposit account. (A deposit account is an account you have at a bank, from which money can be deposited or withdrawn. Your savings and checking accounts are examples.) To get a secured credit card, you must deposit between 100% and 200% of the amount of credit for which you are asking. This deposit is held in a special savings account, which is controlled by the credit card issuer.

The good news is you don’t have to put up any piece of property, such as your vehicle or house, as collateral. The deposit you make to obtain the card is the actual collateral, so if you default on your secured credit card, the deposit will be used to recompense the creditor.

Using a secured credit card is a great way to rebuild credit because most companies report regularly to the three major credit bureaus. You want to be rewarded for handling money properly, and if the bureaus don’t get the information, then they can’t reward you. Of course, you can’t be using the card to grow a new debt. Start off with small purchases, and make sure you can pay them back in full to gain some positive history. If you maintain good credit on this card for an extended period of time, you could even gain interest on the original deposit.

There are some fees to be aware of when getting a secured credit card. There will be a one-time application fee, as well as a once-a-year annual fee, and a processing fee. If you can make timely payments over the course of a year, your creditor may give you the option of transitioning to an unsecured account, which would eliminate these extra fees.

If you have enough funds to make a deposit, and you have the ability to keep under the credit limit, a secured credit card can counteract with the negative information on your credit report. Having the patience to maintain this type of credit is a great start to rebuilding your credit history.

How to Get Rid of Credit Card Debt

While talking about the retirement plan, financial advisers mostly focus on how much you need to save. But you should know, that to cut your debt is not any less important, especially your mortgage and credit cards. And in order to get out of debt you need to:

1. Evaluate Your Debt
The first thing you should start with is figuring out how much debt you have to deal with. So, take a piece of paper, and put down all of your debts. This includes credit cards, charge cards, mortgages, home equity loans, car loans, personal loans, medical bills and any other debts that you’ve got. Beside each debt, include in this list the associated interest rate and minimum monthly payment. Now, count up all of your entries, and you see a true picture of your current debt load.

2. Make a Budget
A carefully thought out budget will help you to get out and stay out of debt. Be honest with yourself about your spending habits and you’ll receive a much more realistic picture. Make a list of your usual monthly expenses (do not forget about fun things, hobbies and entertainment) and calculate how much you make per month including all forms of your income. And then create a budget that will minimize the usage of credit cards, cash-only is your goal.

3. Reduce Your Spending
In order to get money for debt repayment you will have to cut your spending. Look for some ways to lower your phone and electronic bills, auto and homeowner’s insurance and all your other bills. In such way, you’ll able to use your savings directly for your debts and enjoy the fact, that you’re on the right way to a debt-free life.

4. Begin Saving
While getting out of debt, the avoiding new debt is important as well as paying off debt. So, it’s very important for you to be prepared for some unexpected expenses – such as medical bills or car repairs – that could make you start spending with your credit card again. Assess how much it may cost you and put that sum aside. You should understand that fact that building up your emergency fund may take a lot of time. So, even $20 a month will help, just do not worry if that’s all you can afford.

5. Struggle With Your Debt
Now, when you have finished with all of the previous steps, it is the right time to start struggling with your debt. Apply the money you’ve saved with your new budget to your debt. Keep this way until all your debts will gone. Of course, it may take a while, but if you adhere to this plan you’ll become a happier, stronger and debt-free person.

How to Avoid Credit Card Fees


Credit card distributors always advertise handsome promotional rates just to allure potential cardholders. If you want to become a new cardholder, you must watch out for credit card fees. Although they offer the lowest of interest rates, the credit card company will definitely be getting back at you by embedding extra fees. How to avoid paying them more than what you owe?

Many people just rush into applying to get a credit card without even being aware of all of the accumulated costs. Almost all credit cards come with some hidden fees and unknown charges; and you should always pay extra attention to them before applying.

Almost all cases, all of these fees and extra charges will not even be noticed until it is too late. And you easily end up paying thousands in the end without even realizing it.

Here are some tips to help guide you in avoiding excess credit card fees:

Pay the bill ahead of time

Never wait until you’re the due date arrives before settling payment. Pay off all the necessary charges as soon as you got cash to do it. It is required that all credit card issuers provide at least 28 days grace period.

Try to sign up for an automatic payment facility especially if you are prone to forgetting monthly due dates. This very ideal for people who have multiple credit cards and those who are managing many types of credit lines like car loans, mortgage, and personal loans.

Request for waive

In some cases, wherein an emergency could not be avoided, at the same time you will not be able to make your payment on time, try to call the credit card company immediately and request them to waive some late payment fees and promise to make your next month’s payment on time. In addition, if your records prove that you have become a very reliable client, chances are, you may be granted that wish, thus avoiding additional credit card fees.

Do not go over the credit limit

It is obvious that exceeding your credit limit will automatically cost you extra fees on your bill. Always check your credit account to assure that all the charges are accurate. Before making a large purchase using a credit card, be sure that you have enough credit left. And always keep your credit card spending to just a minimal portion.

Don’t borrow cash from your card

All credit cards offer cash advance features. This provides the cardholder an option to get from their account by withdrawing cash thru the ATM. Although it seems like a good provision, especially in times of emergency, these are charged with very high interest rate. And cash advances are not automatically covered by the grace period; you will incur extra credit card fees every time you make cash withdrawal.

ETFs: Your free guide to exchange-traded funds

An exchange-traded fund (ETF) is a security that tracks a particular index or basket of assets. This could be the FTSE 100 or a selection of shares of companies involved in alternative energy.

ETFs are traded on the stock market, just like ordinary shares. So they can be bought and sold whenever the market is open, at a regularly updated price. By contrast, passive unit trusts – a rival tracking product – can only be dealt with once a day and only through the issuing manager.

Even though ETFs trade like ordinary shares, they don’t attract stamp duty when they’re purchased.

Diversification and cost benefits

ETFs offer exposure to an entire index, usually at relatively low cost. They are not actively managed, which means there is no need to pay fat salaries to a fund manager. As a result, annual expenses paid by the ETF investor are relatively low, typically between 0.2 and 0.75 percent of funds invested.

What’s more, ETFs are not subject to an initial charge or set-up fee, as is the case with unit trusts. The only costs when dealing are the standard brokerage commission and the spread – the difference between the prices at which you can buy and sell.

What’s on offer?

Today, the range of ETFs on offer is wider than ever before, covering an ever-expanding array of national indices, industrial sectors, commodities, futures, bonds, and other asset classes.

Consequently, it is now much easier for private investors to gain exposure to a range of previously inaccessible markets. There are also opportunities to achieve double or treble returns, as well as to sell short.

Index and specialist ETFs

Besides mainstream ETFs that track the world’s top indices such as the FTSE 100 or the Dow Jones, you can also buy or short sell individual industries such as mining or financial services. So, if you were bullish on the stock market in general but bearish about miners, you could buy an index ETF while short selling a mining ETF.

As well as national stock markets such as China or Brazil, ETFs cover segments of the market, such as mid-sized or small companies, and also entire geographic regions such as Europe or Asia.

Away from equities, there are ETFs that track commodity indices, government and company debt, real estate, private equity, and currencies.

Profit when markets fall

Whereas unit trusts generally only benefit when the markets they track go up, there is a type of ETF that gains in value when their underlying market falls. Short ETFs provide a mirror image of whatever the price of the underlying asset does. So if oil falls, they rise.

However, in terms of the equity-linked indexes, these types of ETFs are only really suitable for sophisticated traders. This is because the price of the benchmark index is re-set daily, and the returns are compounded – so, even if the index is down over an extended period, an investor who held on through volatile trading conditions could still conceivably lose money even if he was right in his prediction of a fall in the underlying.

Exchange-traded commodities

Originally, the large size of commodity futures contracts prevented small investors from getting direct exposure to commodities. With the advent of exchange-traded commodities (ETCs), the minimum financial outlay has been markedly reduced, thereby easing the way for private investors.

ETCs track the performance of individual commodities such as copper, petroleum or wheat, or even total return indices based on a single commodity. For example, many investors have recently gained exposure to physical gold for the first time through the use of ETCs such as ETFS Physical Gold (code: PHAU), which has been designed to provide a return equivalent to movements in the gold spot price. Currently, around 70 percent of private investment is allocated to precious metals, while 15 percent is given over to energy ETCs.

If, however, you want to spread your risk, you could always opt for an ETF that invests in a more diversified basket of commodities, such as the ETFs All Commodities ETF (AIGC). This has been structured to track the DJ-AIG Commodity index.

Government and corporate bonds

ETFs have also made it much easier for private investors seeking to buy into the government and corporate bond market. As ETFs are traded on the stock exchange, both historic and real-time pricing must be made readily available. Such price transparency was once the preserve of institutional investors, so ETFs have done much to open up this market.

As most bonds are held till maturity, the main problem facing those structuring a bond ETF is ensuring that it is comprised of enough liquid bonds to track a particular index. (This is more of a problem for corporate as opposed to government bonds). For this reason, representative sampling is often employed, which involves reducing coverage of an ETF to the most liquid of the bonds, and is a feature of ETFs such as the iShares Euro Corporate Bond (IBCX), which offers exposure to a range of euro-denominated investment-grade corporate bonds.

Tracking issues

Tracking errors pertaining to the bulk of ETFs and ETNs currently in issue remain relatively small, according to recent research from Morgan Stanley. Despite extreme market volatility, these instruments demonstrated close alignment to most indexes. Last year, the weighted average tracking error for all US ETFs was just 0.39 percent.

This is not to say, however, that negative tracking errors do not occur. Some specialist ETFs, or those subject to diversification requirements, haven’t always fared well, and the process of representative sampling (referred to above) is another factor that can lead to tracking errors.

The Vanguard Telecom Services ETF (VOX) and the iShares FTSE NAREIT Mortgage REITs (REM) both fell short of their tracking indexes last year. Additionally, investors need to remember that ETFs with larger expense ratios tend to have higher tracking errors simply because fees come directly out of investors’ returns.

Interest and distribution payments

Bond ETFs pay out interest through a monthly distribution, while any capital gains are paid out on an annual basis, fewer fees, and expenses. Holders of share-backed ETFs are also eligible to receive payments in the form of a pro-rata share of dividends payable on the portfolio of stocks comprising a given ETF.

It may be possible in some instances to reinvest your dividend payments. Dividends paid out of an ETF’s net investment income or net short-term capital gains – if any – are both taxable as ordinary income. Distributions of net long-term capital gains, in excess of any net short-term capital losses, are taxable as long-term capital gains.

Tips on how to manage money when you get a raise

A raise can be a boon to your household finances. Although it is tempting to immediately spend the entire raise on a new car, handbag, laptop, or gadget, there are several considerations that should be addressed before you splurge.

The first thing you should do if you get a significant raise is checking your tax situation. There are some instances when the raise pushes your income into the next tax bracket. Most employers will automatically adjust your withholding, but if you are already claiming zero exemptions, you may need to have an additional amount withheld in order to avoid penalties. This will require an updated W-4 form.

The next thing to consider is your retirement contributions. If you have access to a 401(k) account from your employer and your employer offers matching funds, you should contribute at least enough to the account to receive the full company match. Even if your fund choices are meager, the employer match is free money that is available to fund your retirement. If your 401(k) offers low-cost mutual funds or index funds, consider increasing your contribution to the federal maximum. In 2009, the maximum annual contribution is $16,500 or $22,000 if you are over 50.

When considering a significant 401(k) contribution, keep in mind that every employer has slightly different limitations that may prevent you from contributing to the federal maximum. One limitation is the maximum percentage limit or the maximum percentage of your pay that you are allowed to contribute and shield from taxes. The second limitation is the highly compensated employee (HCE) income limit. Employees that have an annual income greater than the HCE limit will have their maximum contribution lowered or even reduced to $0.

If you do not have access to a 401(k) account or you are contributing the maximum amount, consider saving most or all of your raise in an IRA or a savings vehicle. The savings vehicle should be chosen based on your timeline. Money earmarked for an emergency fund should be liquid, either in a high-interest savings account or in a combination of savings and a short-term (under two years) CD ladder. Money designated for large expenses should be in a CD ladder with a timeline based on when you expect to incur the expenses.

Finally, if you are able to fully fund a 401(k) or another retirement account, an emergency fund, and a large expense fund, use some of your raise as a reward for your fiscal responsibility, but keep in mind that a permanent boost in your standard of living may put you at risk for living beyond your means in the future.