A prepaid debit card allows you to activate plastic that can be used for services, in retail stores and online.  The catch is that you have to pay to activate your own money because there are fees associated with activation, some deposits and usage of the card.   John Ulzheimer of www.SmartCredit.com, calls prepaid debit cards a “glorified gift card.” 

Another drawback is that your prepaid debit card is backed by your own money, so it is not building you any credit history.  Only cards that extend credit to you will report your use of credit to a credit bureau. 

Suze Orman touts that you may opt in with her new prepaid debit card to allow TransUnion to mine your usage information for their use now, and hopefully your benefits later.  However, the real credit score with value is the FICO score issued by Fair Isaac Company. 

So, what are your options for a similar product with lower expenses?  Check out www.SmarterChoice.org to find a credit union in your area.  Go by and see if you would qualify to join, open an account, and received a debit card without all the fees. 

If you find yourself, or someone you’re trying to assist, without a bank account, check out www.JoinBankOn.org.  There you will find help and resources in your community to help establish bank accounts.   To qualify for better terms in the long run, it’s worth the responsible actions required and effort to get into the banking system. 

One of my former students simply buys a monthly gift card at Walmart to keep her within her budget.  When it’s gone, she can’t spend anymore in Walmart for that month.  She saved fees and spends within her means.  Others simple use cash. 

You may feel like carrying plastic in your wallet with images and signature of your favorite celebrity will make you appear smart and savvy.   However, the savviest thing you can do is to avoid fees that only set you back more.  Instead, build slowly to manage a bank account, and then a credit card responsibly.  Pay off your card monthly, and build credit history that rewards you with low rates and fees.

Groupon has been the king of deal spots.  However, some investments in this new way of advertising through a large social network have had disastrous results.  According to Jeff Korhan, “It Attracts the Wrong Customers.  In addition to cannibalizing on profits from loyal customers, a Groupon campaign can attract new ones that are only there because of the deal.”  Jeff further suggests, “While you may gain some new customers, one of the hidden costs is losing current customers that view your new marketing practices as unfair.  It’s a risk. If you really do have the money to spend, why not invest in your current customers? You could offer them something like a recession discount at a time when they may need it most.  Trust me, they won’t forget it when their contract or subscription is up for renewal.

A retrospective from Jessie of Posies Bakery and Café is very telling.  She calls it the single worst decision she has ever made as a business owner. 

Imitators have quickly sprung up and some of them are emerging with attractive improvements to benefit small businesses.  One such startup is Bloomspot, based in San Francisco.  They guarantee a certain customer spending amount and give the small business owner the ability to target more frequent customers and limit the deal.  Bloomspot’s CEO, Jasper Malcolmson, states “Consumers only get the best deals if they demonstrate they’re good patrons.”  One current drawback is that Bloomspot is only available in eleven major cities, and for travel. Hopefully, that list will grow. 

Womply and Google are other deal sites reported on by Tomio Geron of Forbes.  According to Geron, Womply offers a proposition for consumers who buy deals on Womply.com with any credit or debit card.  They pay at the merchant using the same card and get a credit sent back to their card.  No coupons or phones are required.  Womply doesn’t send a mass e-mail each day to its members.  It only pings customers who have shown a preference for that business.  Merchants can track repeat customers. 

I found the same drawback at Womply that I did at Bloomspot, they’re not in my area at this time.  I was assured that if I sign in my current credit or debit cards, Womply would personalize my offers based on my spending habits, and I’d be ready when the services are provided. 

Google Offers is similar to Croupon’s e-mail a day, though Google is still much smaller.  Deals could move to Google’s search engine.  For consumers, it means relief from e-mail deals.  For merchants, there’s a much wider distribution. 

I agree with Jeff that the only reason to offer a deal is to make your existing clients happier.  So figure out ways to reward and invest in current customers to build even more loyal regulars who will be the best and least expensive advertising you could have.

Mary Hunt is a nationally known speaker, author, and expert on becoming debt free.  I like what she wrote in her November, 2011 Debt-Proof Living Newsletter, regarding Groupon:

“Here’s the deal with Groupon. This company flat out preys on weak people who are prone to react impulsively, tricking them into buying stuff because it looks like such a great deal, not because they really need to eat out at a fancy restaurant or hire four hours of maid service or have an exquisite family portrait taken at the beach.

Groupon and other similar social networking coupon companies that load your email box with daily offers of everything from spa treatments to knitting lessons are clever, albeit, somewhat devious.

Do not ask me how I have become so knowledgeable on how this Groupon thing works. And how it’s impossible to have a normal relationship with Groupon. Just don’t. And believe me when I tell you that the only way to deal with this monster known as Groupon is to unsubscribe. Now.”

Mary has been there and done that with credit cards and doesn’t want to see others sucked in with this new way to separate our money from our wallets.  Her newsletters are packed with helpful information from her many followers, fans, and subscribers who have dug themselves out of debt and share their motivations and successes.  A subscription to Mary’s Debt-Proof Living Newsletter  would be a thoughtful gift to anyone who has a bit of a spending or debt problem.  

While not Home Shopping Network, these deal coupon sites are akin to constant temptation through a new media.  If you subscribe to them, they’ll appear daily in a more personal way…your email.   

Groupon offers some great deals and you can save money if you’re able to follow through in time and it’s something you will actually use.  Stay alert and beware of deal fatigue.

• Consolidate old Federal Family Education Loans and Federal Direct Loans
• Receive up to a .5% interest rate reduction for a single payment plan

For more information regarding the new federal student loan repayment program:

• contact the Department of Education at 800-433-3243, or
• www.studentaid.ed.gov

Beware Private Loans:

No such reductions nor forgiveness is occurring with private loans obtained for higher education.  These generous changes only cover federal student loans.  Therefore, take the time to ferret out all your options in the federal arena first.  Only take out a private loan as a last resort because you may have a more difficult time repaying such a loan.  Slow or late repayment could affect your credit score, causing all lending costs to rise (such as auto and home) as well as other life expenses after graduation (insurance premiums and cell phone bills) to be more expensive.

I was saddened, for consumers, to learn this week that Elizabeth Warren is returning to her esteemed law professor position at Harvard.  Professor Warren certainly deserves more time with her family and a normal life.  I doubt anyone as articulate, assertive, and smart will emerge any time soon in her place.  We are losing a really good one!

It was indeed a thrill and a treat for me to actually meet and visit with Dr. Warren in May when she traveled to my home town and held a small listening session at the offices of the American Association of Retired Persons (AARP.)  Amber Stubbs of CardRatings.com and I attended together on behalf of QuinStreet vertical publishers.  One never knows how a person will be who has had so much publicity and notoriety.  Elizabeth Warren came off warm and compassionate.  She’s a consumer advocate to the core and dedicated to easy access and ethics.  In full disclosure, I consider myself a consumer advocate, know some about what it takes, and respect her commitment. 

Dr. Warren has set up the CFPB as a research based bureau.   Bank examiners are being trained and a database of financial information is being built of lending markets.  Making financial information more easily digestible is a top mandate. 

The CFPB will have teeth.  Not only will it be able to issue guidance papers on problematic financial products, it will be able to send cease-and-desist orders.  If other measures fail, the bureau will be able to take offenders to court.  Sheriff Warren’s time has been well spent constructing an agency that can affect positive change.

Beverly Harzog of Credit.com wrote an excellent letter to the CFPB that outlines suggestions that would improve and simplify applications for credit cards.  These include:

1. Standardize the name and location for the APRs and fees.
2. Group similar items together.
3. Make it easy to understand rewards program details.
4. Some clarity with prepaid cards would be nice.

As a P.S., Harzog asks that the CFPB look into business credit cards, because they aren’t covered by the Credit CARD Act of 2009. 

One of the first initiatives to be produced by the CFPB is a clear, simple, two-page mortgage form.  Be on the lookout for this and other helpful tools to simplify and improve understanding of lending practices.  Sheriff Warren has left the building.  Fortunately, she left it in good hands and set up to succeed.

• Only 24 percent of consumers are completely satisfied with their current program.
• More than 40 percent of survey respondents plan on using their credit card rewards for summer travel in 2011. 
• For those who plan to use credit card rewards to supplement their summer vacation, the most popular rewards redemption options were rewards were hotels (55 percent), air travel (48 percent) and gas (42 percent).
• Nearly 60 percent of those surveyed are unsure as to whether they would be charged foreign transaction fees
• “Free money” continues to be the number one motivation for consumers to earn and use credit card rewards (61 percent). 33 percent of respondents appreciate the everyday savings provided by rewards programs.
• 48 percent of survey respondents reported gas costs will influence their summer travel plans. 
• Blackout dates (26 percent) and inability to book a last minute trip (24 percent) continue to be the main barriers preventing consumers who wanted to redeem rewards for travel but couldn’t.

The research was taken among U.S. adults who indicated they currently have a credit card with a rewards program.  BIGresearch® conducted the survey from May 31-June 8, 2011.

It doesn’t surprise me that cash back shows up as the number one motivator for consumers.  Credit card companies incentivize spending with cash back so that the people who spend the most will want to spend more.  In today’s economy, if you have it, spending it can create more jobs for people who don’t. 

IndexCreditCards.com allows you to search for the top reward cards via category by using the drop boxes in their rewards card section.  Chase Freedom® Visa with $150 bonus cash back leads the pack with Discover® More® Card and Capital One® No Hassle Cash(sm) Rewards close behind. 

Capital One offers the following tips on how to maximize your reward cards this summer:

1. Follow your travel habits: If your travel patterns – such as hotel or airline – vary from trip to trip, a credit card that is not linked with a specific brand may be an optimal choice.

1. Don’t let your vacation expire: Rewards programs differ, so read the fine print to make sure you redeem for your vacation before you lose those hard earned rewards.
2. Account for extra fees: Additional charges such as fuel surcharges, baggage fees and foreign transaction fees can add up, so take those costs into consideration when budgeting. Also investigate whether your credit card rewards program allows you to use rewards to cover these costs.

Happy Rewards!

These questions and many more were answered for me last evening by a knowledgeable presenter from the Small Business and Technology Development Center.  Most SBTDC’s across the nation currently employ social media experts to help their small business clients understand and utilize this incredible phenomenon.  Type the name of your state in the upper right hand search box at http://www.asbdc-us.org  to find an SBTDC nearest you.   Nancy Knighten was our presenter.  She is at the Arkansas SBTDC.    

Nancy asked how many of us have Googled ourselves, at least a third of us have.  Googling is good, because you learn what is being said about you and what others will see when they Google you.  Margaret Bogle shared that she first learned about Googling five years ago when she attended an International Women’s Forum dine around.  The hostess knew something unique about each guest and later shared with Margaret that “Any good hostess will Google her guests before they arrive.”  If you want to know what’s being said about you on a regular basis, you can set up a Google Alert at www.google.com/alerts.  Just enter your name.   Another useful self monitoring website is www.SocialMention.com. 

According to Nancy, the top leaders in social media are Facebook, YouTube, Twitter, and LinkedIn.  For your own credibility, make sure you’re putting the same information on all sites.  In other words, don’t be one person and one website, and present a completely different persona on another.   Also, think before you post.  Whatever you upload will be there permanently. 

Facebook is useful for family and closer relationships.  You are allowed only one personal Facebook account per person.  Otherwise the Facebook cops will kick you off.  Learn more about privacy settings at www.GCFLearnFree.org/FaceBook101.  LinkedIn can help you build your professional brand.  You can manipulate your privacy settings into groups.  Twitter allows you to prove your expertise with regular, helpful tweets under 120 characters.  YouTube can be both entertaining and useful for video marketing.

Ms. Knighten recommends having a purpose behind your presence in social media.  She shared with us the enlightening and entertaining YouTube video by Erik Qualman, Social Media Revolution.  Nancy also recommends his book, Socialnomics: How Social Media Transforms the Way We Live and Do Business.

Free File is a partnership between the IRS and tax software companies. Money is saved, errors are reduced and simplification becomes a beautiful thing. To be eligible to use this program, your adjusted gross income must be $58,000 or less. Participating companies are allowed to have their own criteria, so you’ll need to check out the more than 17 companies rules at www.Freefile.IRS.gov.

The IRS website is actually user friendly and has previously won awards for their easy access to understandable tax information. For terrific videos and meaty articles on tax tips, Google Sandra Block at USA Today.

Oh, and one more very important thing; if you file online and have any tax refund electronically deposited, you can expect to receive your refund in a week’s time. And, for those with smart phones, according to Sandra Block at USA Today, there’s a new free phone app to track your refund status. Sandra says the app, IRS2Go, can be downloaded for free on iPhones and Adroids.

Therefore, consider using dormant cards once every three or four months and then paying the balance in full. You might link the card to one of your utility bills and have the payment automatically drafted from your bank account to make sure your card is used and always paid on time. One caveat about using automatic billing and drafting is that something could be wrong and you won’t know it until late in the game. At least open your bills to see that your utilities are consistent and correct. I once had a water leak, unknown to me because I wasn’t opening my utility bills regularly. It took me a long time to get it straightened out once I discovered the problem.

Your credit score can be negatively affected if your cards are closed. Even if you don’t particularly need or want a credit card, your credit score connects many other areas of your financial life. Credit scores are used for setting some automobile insurance rates, cell phone rates, for consideration on rental applications and job applications. It can be important to you when you least expect it. Keeping at least one credit card active and paid on time puts you in a strong position and will be worth the effort. Clark Howard shares his tips on cycling your unused credit cards at http://clarkhoward.com/liveweb/shownotes/2008/07/02/13728/.

For the most comprehensive list of current credit card offers, listed by category, go to www.IndexCreditCards.com. Bring those dormant credit cards to the front of your wallet and improve your credit score.

How about you? Are you saving right off the top so that you don’t see it and don’t consider the money you put back for later cash for right now?

There are many avenues you can take to make your savings automatic. Start where you work, if your employer offers attractive savings options. When the money comes out of your paycheck before you receive the remainder, you more or less forget about it. That is, until you need it, and then you’ll not only be proud of yourself, but also possibly relieved and grateful.

If your place of employment doesn’t offer a viable option, then use your checking account. Have a certain amount electronically drafted from your checking account on the same day each month and automatically deposited to a savings account at the same financial institution.

Currently, interest paid on savings account is very low. When it comes to contingency or emergency funds, the return rate is not as important as having some money there to draw on when you need it. Get Rich Slowly.org shares timely tips on putting “pay yourself first” into practice. http://www.getrichslowly.org/blog/2010/11/04/how-to-save-putting-pay-yourself-first-into-practice/

You can shop for rates at www.money-rates.com. Higher returns will usually be found at credit unions because they are serviced by members at a lower operating cost and are given regulatory breaks that the banks don’t receive. Liz Weston shares tips on advantages of credit unions at http://asklizweston.com/2010/02/09/what-you-gain-from-switching-to-a-credit-union/. Online banks also offer higher returns because they don’t have the brick and mortar expense of buildings and employees.

No matter where you choose to you stash your emergency cash, make sure your money is covered by insurance. The Federal Deposit Insurance Corporation (FDIC) covers accounts at banks up to $250,000 per unique account. Most online banks also carry FDIC coverage. Their logo will show prominently on the website if they do. Credit union accounts are covered by the National Credit Union Association (NCUA.)

As far as the amount to save, moderation is the key. Put back a reasonable amount on a regular basis. If you see you can save more, then do it, but if you have to go into your savings for living expenses, reduce the amount you’re with holding, or reduce your living expenses. When a person diets to the extreme, they often binge later on. Same goes for savings; make sure the amount is comfortable for your lifestyle and save consistently and automatically if possible.