The Best Credit Cards for Teens
Posted on 21. Sep, 2009 by Stuart in Credit Cards
Approximately 80% of college students have a credit card with an average debt of around $3,500, while 1 in 10 of these students have accrued over $7,500: teaching high school teens about responsible credit card spending is becoming painstakingly necessary. With statistics like this, the best credit cards for teens are probably “NO” credit cards.
Parents that send their son or daughter off to college, or teens directly entering the work force, without any background in responsible spending can cause some hardships and problematic accruement of debt. Obviously, the ultimate goal for any parent or guardian is to give their teens the knowledge to sensibly use a credit card and not amount any bad debt; however, the journey to obtain this goal begins with a simple one on one lesson about the topic at hand.
Many parents and guardians take out their recent credit card statement and show their teens their most recent transactions, explain the reason for their purchases, and then how they intend to pay the monthly bill in full, and on time. It is important to make teenagers understand how the penalties work for late payments, and how credit cards are not intended for short-term loans or to develop a lifestyle that they cannot afford. Surprisingly, about a third of high school seniors use a credit card, while only about 5% of teens, ages 12-18, think that credit card debt is not a problem (Teenage Research Unlimited, 2004); so the odds are in favor of the parents.
Teens embarking on their journey into financial freedom usually begin with a pre-paid debit card, or stored-value card, which are much like gift cards. Depending on the card, some vendors charge nominal fees to check balances at ATM’s, withdrawal cash, and for each transaction. Vendors such as MasterCard and Visa have introduced cards entitled PAYjr, MYPlash, Allow Card, and Visa Buxx.
These are the best credit cards for teens because their parents and themselves can view online statements, set spending limits (as it is all pre-deposited), and review purchases to exemplify good spending habits. Additionally, any authorized user can deposit money into a card’s account, including the teen’s employer, grandma, and mom and dad. Most of these cards require an activation fee, maintenance fees, deposit fees, and balance inquiry fees, however, in most cases, do not charge any transaction fees.
After a teen has fulfilled their “requirements” to graduate from a pre-paid card, some experts feel that a debit card or secured credit card is a logical next step. A debit card is linked directly to a checking account, and teens must keep track of their account balance to be sure they do not run into overdraft fees. Some banks have developed reserve accounts in the event of over drafting, in which the teen denominates an amount of money that earns a minimal amount of interest so that the bank can pull the remaining amount of required funds. Furthermore, some banks allow the requested over drafted funds be taken directly from the savings account with no additional fees; however, with any checking or savings account, the potential for insensibly onset fees is present.
A secured credit card is also one of the best credit cards for teens and can rest the worries of many parents and guardians and is a great gateway into complete credit independence. A secured credit card is directly linked to a teen’s savings account, which sets the credit limit each month to the total amount in the savings account. A secured credit card also has a safety feature built in that will automatically withdrawal payment from the savings account in the event a teenager forgets to pay the monthly bill. Furthermore, this type of card allows the teen to begin to establish credit, as well as learn the importance of paying their bill on time.
So after all of the preparation the time has come, as an actual credit card is in sight. Some parents elect to co-sign with their teen, while others make them an authorized user on their account. Whatever the final decision, either choice will mark the milestone as a pre-cursor to complete independent financial freedom.
Photo source: JasonRogersFooDogGiraff eBee
Debit Cards Versus Credit Cards
Posted on 03. Jul, 2009 by Stuart in Credit Cards, Savings
Debit cards have come a really long way from their original incarnations; where in the past, they primarily served as a means to withdraw funds from a bank account, today they can be used at point of sales transactions at many stores and online retailers. The addition of a Visa, Mastercard or other credit card logo to the face of a debit card can expand its usefulness exponentially, allowing it to be used anywhere such cards are accepted. However, some people are confused about the difference between credit cards and debit cards, as the two have become somewhat intermingled and the line between them has become more and more blurry.
The Basics Of Debit Cards
Essentially, debit cards are linked to a checking or savings account and are used much like a check would be. Most debit cards are used in combination with a PIN (personal identification number) that increases their security features and helps prevent unauthorized use. Since debit cards are linked and provide access to a person’s personal bank accounts, they must be kept in a safe place and their PIN must be kept a closely guarded secret. In terms of appearance, debit cards closely resemble credit cards but do not always have a series of numbers or expiration dates printed on their faces.
Many people strictly use their debit cards for the purpose of withdrawing funds from a bank account. The term “debit card” is basically interchangeable with the term “ATM card” – which means “automated teller machine card.” When people refer to using an ATM card, they usually mean a debit card, and vise versa. These cards are accepted not only at the bank’s ATMs, but also at the ATMs of other, unassociated banks; when used at ATMs outside of their own network, though, debit cards can incur usage fees.
In addition to being used for withdrawing money from a bank account, debit cards are accepted at many grocery stores and other retailers upon checkout. Once all of the items have been scanned and a total has been given, a person can use their debit card – in combination with their chosen PIN – to pay for their purchase. This option has dramatically decreased the use of personal checks in such situations. Retailers generally prefer debit cards over personal checks as much less processing is involved from an accounting standpoint.
The Basics Of Credit Cards – And Credit Card/Debit Cards
Unlike debit cards, credit cards are not normally linked to a personal checking or savings account. Instead, they serve as a way to gain access to a line of credit extended by a credit card company. When a person uses a credit card to pay for their purchase, they are accruing debt that must be paid off at a later date; this debt also accrues interest charges and may be subject to other processing fees. By not being careful, a person can accumulate a great deal of debt very quickly by using credit cards; when the statement arrives in the mail, many people realize how reckless they have been.
Credit cards are often used in lieu of debit cards when debit cards are not accepted. Most online retailers do not provide a means of using debit cards and PINs, so people who find themselves shopping online often have to use a traditional credit card. However, one of the most popular exceptions to this problem are debit cards with credit card logos and numbers imprinted on them. These cards allow a person to use the funds from their personal checking or savings accounts to pay for purchase anywhere that credit cards are accepted.
Although a debit card may have a credit card logo, numbers and an expiration date on it, it does not cause additional debt to accrue. These products have further decreased the popularity of paper checks, and fewer and fewer people are using those items these days. Instead, the convenience of credit cards and debit cards rolled into one is rapidly becoming the preferred method of payment for millions of people.
Photo source: LeArmoire
Where to Get Help For Credit Card Debt
Posted on 27. Jun, 2009 by Stuart in Credit Cards
I can think of plenty of places that are willing to help you out with credit card debt … with creating it, that is! Unfortunately there is a marked lack of help from the other side of the fence. That is either because people don’t care, or they’re making money off your credit card debt. However, there are some shining lights of goodness, hope and purity in our community, to whom you can turn to help you get out of credit card debt. We look at some of the best options.
Debt Consolidation
Any debt consolidator worth their salt does not charge you a fee. Competition for the loan dollar is so hot that credit providers will give loan brokers a commission to help them find eligible customers – so you shouldn’t have to pay them a cent.
Loan brokers are quite easy to find, even in country areas, and most offer debt consolidation services. They go way beyond Fox Symes – these guys are just the ones with the bigger advertising budget, and the Today Tonight factor. They can either find you a specialised debt consolidation loan, or assist you with rolling your existing debt into your mortgage for a lower interest rate and easier repayment options.
If you go for the debt consolidation option, just make sure that credit card statement doesn’t begin to look like a cheque for $5,000. Remember those Looney Tunes cartoons, where the big mean bulldog would cook a roast chicken in his yard to tempt Sylvester over the fence? Well, that credit card is the roast chicken, and the bank (in conjunction with a healthy sense of greed 
!) is the big mean bulldog that will eat you up. Chop up your cards if you consolidate debt.
Debt Settlement Companies
While they are certainly more aggressively marketed in the States than they are here, debt settlement companies do exist. Sometimes they offer to reduce your debt by large amounts, for a certain fee. The theory seems sound enough, until you know the bare bones of it. You pay the settlement company, who negotiate with your creditors in order to lower your debt. BUT BUT BUT!
What really happens, is that the first few payments go straight to your debt settlement company. The next payments will begin accruing in your account with them, while they wait for your debt’s age to pass six months (or a certain allotted time, depending on the state you live in). After this time, your account will be ‘charged-off’, and can be settled at a lower rate by companies that would rather take ANY money than go to the hassle of repossessing things or going to court.
These charge-offs and the late fees are recorded with credit reporting bureaus, which makes it inordinately hard to get credit anywhere – even for a toaster on an interest free plan.
Also, in some countries, any charge-offs are considered income to you, and the government will tax them.
Consumer Credit Counselling
These services are often free, run by non-profit organizations to help people make a plan for getting out of debt. It will require sacrifices, there are no easy ways out and no debt-discounts, but this way will keep your credit intact and avoid the hassle of bankruptcy.
If you have a great idea of how to spend money … just not on paying off your debts, consumer credit counselling is like manna from heaven.
Online Advice
Sources like www.credit.about.com have plenty of good information – but it always pays to check with an Australian financial specialist, as rules and regulations can vary wildly between countries.
Bankruptcy
This is always a last-resort option. Bankruptcy is a paperwork nightmare, and if you want a loan for a car, house, TV, or just about anything later on, you’ll have a big red stamp over your name for at least the next 7 years. You should get a lawyer’s advice if you are considering bankruptcy.
Photo source: Andres Rueda
When Should I Pay Off My Credit Card?
Posted on 23. Mar, 2009 by Stuart in Credit Cards
It would be nice to just leave it until you turned 60, wouldn’t it?! Imagine that … decades of repayment free time, to wallow about in, sipping pina coladas and listening to island music. Unfortunately, if you have a credit card, it is much more likely that your banker is doing this, than you!
Of course, the simple answer to ‘When should I pay off my credit card?’, is when you can afford it. The reason that people lend you money is that they get something in return – interest – and the less time you owe them money, the more money you’ll find in your pocket at the end of the year.
But that’s where the simplicity stops! We look at several different credit card scenarios, and the ideal time to pay off your debt in each case.
The Hard and Fast Rule
One golden rule of credit card payments is to always make the minimum monthly payment, before the due date. If you don’t do this, you’ll get hit with substantial late fees as well as the substantial interest that you probably already pay. That’s your beer and skittle money going to ‘da man’!
If it is within your means, take your minimum monthly repayment from when the card is close to the limit (if you aren’t sure, ask your bank), and set up an automatic debit from your everyday account. This ensures you won’t forget – and will probably mean that you pay off slightly more than the minimum repayment every month (a figure which is set to benefit banks).
Interest-Free Period Cards
If you have a card with an interest-free period, and then a slightly higher rate of interest after that, the best idea is to pay off your balance in full at the end of the interest free period. If you have 30 days interest free, pay it off every 30 days.
One sneaky, slimy, squirmy, icky trick that banks play on people with interest free periods (and those who tend to use their card for cash advances, also), is that any payments you make do not necessarily come off your oldest debt. So, if you bought a $50 item one week, another the next, another the next and another the next (for a total of $200 for the month), if you them pay $50 off in the fifth week, that repayment may be used to cover one of your newer $50 debts, rather than the oldest one. This means that your $50 debt is accumulating interest at the higher rate. Bingo – but not for you.
If you have a cash advance facility on your card, it probably comes at a higher rate than general purchases. The same theory applies – any repayments you make may go to the purchases first, while the cash advance debt sits there, with a higher than usual interest charge.
Non-Interest Free Period Cards
For cards without an interest-free period, the advice is simple. Pay it off as soon as you can. You may have heard some financial rumour and innuendo about how keeping a balance on your credit card improves your credit score. That is not precisely true – actually, regularly taking out credit, and then paying it off gets you a good credit score. You can do this by charging your credit card, and then paying it off as soon as possible, completely … which will also net you a lot more money than paying unnecessary interest to the bank.
For example, if you have a $5000 credit card debt, which you let revolve from month to month, paying off $200 each time. Incidentally, although circumstances vary, this is usually more than the minimum. Even without charging anything else, your credit card provider will have made $855 in interest from you, over the two and a half years it will take to pay off the card. Can’t you think of anything you’d like to spend $855 on?!
Ever lost a credit card?
Posted on 20. Apr, 2007 by Stuart in Credit Cards
Hands up all those who have lost a credit card at some point in their shopping lives.
I have. But then I’ve also lost every piece of jewelery that’s been given to me. I lost my wedding ring – twice. I lost my gold tie pin – how do you lose those things? I lost a sterling silver wrist chain, necklaces, watches…the list is endless.
Last summer I even had the unfortunate experience of leaving my credit card at a retail booth at a large conference. The chances of tracking a lost credit card down when you have no way of contacting anyone about it, are fairly remote. Instead, I phoned my credit provider and had them cancel the card and reissue me with a new one.
It’s a little inconvenient but it’s not an insurmountable experience.
Unless, of course, you happen to lose your credit card in the middle of an armed robbery. And you’re the felon.
Then the situation becomes a little more tenable and inconvenience is no longer the issue.
This is exactly what happened to this 24 year old [site since removed] who is facing a jail sentence after leaving his credit card at the scene of the crime. In most situations, the average customer would be more than happy to receive a phone call from the police informing them that their credit card has been recovered. Not in this situation.
It reminds me of Amex’s advertising slogan – “Don’t leave home (or the scene of a crime) without it.”
BofA embroiled in possible account identity problems
Posted on 15. Feb, 2007 by Stuart in Banks & Financial Institutions, Credit Cards, Identity Fraud
What do you do when market share becomes too competitive? You source other untapped markets that may be as feasible or more so that the bottom line continues to increase.
This seems the logical explanation for Bank of America’s latest insurgence into a possible market, illegal immigrants, obviously identified by other banks – but never courted. This untapped audience could be as large as 8.7 million persons according to one source and may even be as large as 20 million people.
That’s a fairly sizable portion of the population who have absolutely no banking opportunities. It presents itself much like finding a nation of people who don’t wear shoes but have been trying everything to keep their feet covered.
The Bank of America is offering clients a $500 credit card if they have a checking account with the bank. The only stipulation is that they have a relevant Individual Taxpayer Identification Number (ITIN) issued by the IRS. Critics, however, complain that these ITIN’s are too easy to secure for undocumented immigrants.
Possibly, this could lead to many problems by allowing identity theft to occur via a legitimate avenue.
A Department for Homeland Security spokesman, Russ Knocke stated,
“At face value the program seems to be problematic. It seems to be lending itself to possibilities of perpetrating identity theft or creating more risk for money laundering.”
Very scary when you consider how easy it might be for a person bent on terrorist activities to legitimately use banking facilities in the US.
The plan is still in its pilot stage but by all reports it appears that it will be rolled out throughout all Bank of America branches in the very near future.
Source: The South Florida Business Journal
Could you live off your credit card points?
Posted on 08. Feb, 2007 by Stuart in Credit Cards
You can if your employer’s paying for your all-expenses-paid credit card and its attached to a rewards program.
In the case of Kate Carson, she now has enough Amex points to purchase a round-the-world ticket. Instead she treats herself to facials at more than $200 a pop.
“There’s almost nothing I can’t buy with points,” says Carson. “It’s great.”
Many employers are now paying for their staff to enjoy the bonuses of a rewards credit card citing its use as an added benefit. Those employees who have jobs that take them away from home for long periods of time and use credit cards for their expenses can tap into the huge world of reward spending.
I know I never have a problem spending other people’s money…
Funeral director used clients credit for online porn habit.
Posted on 05. Feb, 2007 by Stuart in Credit Cards
How can you tell if online porn’s got a hold in your life?
When you have to use a grieving family’s credit card to pay for it.
This sad tale was broken last week when a Hippensteel Funeral Home Director [link since removed] was arrested for using a client’s credit card to fund his online habit.
This story would be bad enough if it were a store employee using a customers card details for their own transactions (and it happens nearly every day). However, what makes it startling disgusting is non only the use of the card but also that it was stolen from people who were already suffering a great loss.
Are there no morals left in this world?
Divorcing the credit card debt
Posted on 24. Jan, 2007 by Stuart in Credit Cards, Credit Debt
There are two things you never want to marry together: divorce and credit card debt.
It is not that it’s too hard to circumvent these days but the continual hassle from financial creditors can literally drive you insane. All they want is their money and if there’s a whisper of divorce on a client’s lips they psychomorph from helpful Dr Jekyll to insidious Mr Hyde.
Even the most painful divorce can be alleviated with a court settlement. This should see the credit card debt cleared or at least the responsibility of payment to one or both of the partners. But until that point of clarity occurs many credit card institutions will hound you, and your ex-spouse, seeking payment gratification.
The hard thing about a divorce is that it can become a three-way struggle over the debt. You claim it’s not your responsibility and therefore don’t make any payments, your ex-spouse claims it’s not his problem and likewise refuses to pay and then the card provider threatens to sue both of you.
Everybody becomes anxious about their obligations and responsibilities and it becomes harder to deal with than holding a snake soaked in massage oil.
So, how do you divorce and get rid of the credit card debt?
- If at all possible don’t get a divorce. Go and see a counsellor. Compromise your position. Buy her flowers – just do whatever it takes.
- If that doesn’t work… try and resolve your divorce with an amicable solution as quickly as possible. The quicker the settlement the faster you can get back on with your life
- Communicate your resolutions Keep your creditors, including your credit card provider, in the communication loop. Tell them when you expect the payments will be made and stick closely to your promises.
- Trying selling an asset to offset the debt. In any divorce, the assets accumulated by the couple will always need to be split so trying selling the largest, usually your home, first and offset any debts with the proceeds.
- Separate the debt If the divorce is amicable, or at least not inhospitable, try dividing the credit card debt between two new cards: one for each partner. If multiple credit cards are involved this may become a little tricky but some financial institutions will work this one out for you in order to get your business.
Divorce is no place for credit card debt to loiter so try and be swift with your decision making and life may get back to normal with less aggravation – certainly from your credit card provider anyway.
Is this a clever credit card strategy?
Posted on 22. Jan, 2007 by Stuart in Credit Cards
Jeff Brown from the Philadelphia Inquirer recently wrote a column explaining one of his reader’s strategies for combating credit card debt.
The reader had amassed more than $45,000 in debt and was taking advantage of introductory free interest periods. He would transfer the balance from an existing card to a new card while he invested the amount owing at 8-9%.
So what’s wrong with this strategy? These were Jeff’s suggestions;
1. To earn an interest rate of 8-9% on cash you need to be investing in some fairly risky ventures. The problem ten becomes enlarged if the investment fails or dips substantially and leaves him with less cash than he first had.
2. Zero-percent credit card deals abound with small print problems. Any default and the rate will increase exponentially.
3. His credit rating will suffer and potentially prevent him from gaining access to future borrowings. Credit rating societies are able to track these dealings diligently and will automatically send up a red flag as the amount of debt won’t decrease.
I would add another to this;
4. For this strategy to have any effect it requires multiple applications for credit cards. Trying to keep up with the application processes and timing of receiving and transferring debt balances would be tricky at best.
The best strategy when dealing with credit card debt is to pay it off as fast as you can. While it is the most convenient debt instrument it comes at a price and using it as an investment tool is hardly wise.
