This Week In Your Wallet – June 21, 2011
I hope everyone had a terrific Father’s Day weekend! I miss my dad every day, but more on Father’s Day, so I try to spend some extra time just thinking about him, maybe re-telling a story about him to my kids. One thing I did not do this weekend – at all! – was shop. I was, quite frankly, shopped out after a full two weeks trying to get my daughter packed for camp. Instead, I spent time with my friends and family, went for a nice long eight mile run, and cooked. The secret to great ribs? Two to three hours in a 250 degree oven before you hit them with sauce and finish them on the grill. Perfect.
This week brought a lot of credit card information…and a few other tidbits. Here they are in an easy-to-digest (though perhaps not as easy as my ribs) form…
Rocking The Prepaid Card World
American Express made headlines last week with the announcement that it’s rolling out its first prepaid card targeted to the general population (rather than teens). Prepaid, interestingly, is the fastest growing segment of the plastic market. In 2010, transactions were up 35% to some $65 billion. Amex made a splash because its new card is different than what already exists; the typical prepaid card is laden with fees for everything from acquisition to reloading to using an ATM to talking to a customer service rep. Amex’s has far fewer.
Prepaid cards are expected to continue to gain market share as the Durbin Amendment (which will limit the amount of fees banks can make from debit card swipes to 12 cents) takes effect July 21. Banks are expected to start to layer fees on debit cards to make up what’s expected to be a $12 billion annual loss of income to them and try to push consumers to credit and prepaid, which aren’t subject to the same swipe fee restrictions, as well. There are pros and cons to prepaid you should know about before you take the leap. Bill Hardekopf of lowcards.com and Odysseas Papadimitriou of cardhub.com helped me compile this list.
Pros:
- It’s easy to get approved, as long as you have the money to load on the card. You can have a pre-paid card if you have bad credit. You don’t need a bank account.
- Most will allow direct deposit, just like a bank account. This is much cheaper way to cash a check than using a check cashing store.
- You can’t get into debt with a pre-paid card
- You can use prepaid almost everywhere you’d use a debit or credit card
- Prepaid cards can help you limit spending. You might use one on a vacation, for instance, so you’re not tempted to spend more than you have or drain your checking account.
- They’re great for giving a kid an allowance and teaching him or her how to live within a budget and use plastic.
Cons:
- They generally don’t report your activity to the credit bureaus, which means you can’t use them to build up your credit score. (For a list of the few that do report go to lowcards.com.)
- Hotels and car rentals generally won’t accept pre-paid cards
- They very often have expensive fees – maintenance, fees for loading money on to the card, activation fees, dormancy fees, declined transaction fees, ATM fees.
- The money loaded on the cards generally isn’t FDIC-insured. You should ask if your issuer is backed by the FDIC.
- You may not get the same fraud protection with a pre-paid card as you would with a credit or debit card. Card issuers generally have the option of whether or not they want to protect you from fraud. Visa and MasterCard have zero liability programs, but there are loopholes – so be sure you understand what kind of protection you have. Visa’s program, for instance, doesn’t apply to ATM transactions or PIN transactions not processed by Visa.
Paying Our Bills On Time – Or Paying More In Penalties
Here’s the good news. Last week, we learned that late payments on credit cards are falling – as are defaults. The bad is that paying late may cost you more. USA Today reported that at Bank of America, customers could be subject to penalty rates as high as 30% for a single late payment. The story says:
“A late payment won’t automatically trigger a higher rate. But the bank says the account will be flagged for review and the rate could be hiked depending on the cardholder’s payment track record. If the rate is hiked, customers will be notified at least 45 days in advance. The penalty rate will then only apply to new purchases. Customers will also have to pay a late fee of up to $25. The fee can go as high as $35 if there’s a second violation in a six month period.”
Yikes! Yet another reason to set email reminders to nudge you to pay on time. Or, if you’re seriously worried that’s not enough, set up an automatic bill payment that you’re sure will cover your minimum, then go in and adjust it upwards to cover the payment you actually want to make.
I Need To Change The Oil When?
With gas prices still at painful levels, it’s good to know that one way you can save some money on your vehicle is by not changing the oil every 3,000 miles as Jiffy Lube, the category leader, has for years told you to do. Now – after some heated press from Edmunds.com and others on how unnecessary that frequency actually is — Jiffy Lube has introduced a list of questions for you to read to decide when it’s appropriate (it’s here). Even better: Read your owner’s manual, which will likely indicate somewhere between 5,000 and 10,000 miles; sometimes as much as 20,000.
Help For Shopping More Efficiently
Lastly, from the New York Times comes news of a new type of shopping robot that not only tells you where you’ll get the cheapest prices, but when you’ll get them. I wasn’t aware (and evidently I wasn’t the only one) that travel sites aren’t alone in changing their prices many times over the course of a day or week. Seems the same is true in other categories. (The Times story noted that “even at Amazon a digital camera might move $50 or $100 throughout a week….”). A startup called Shopobot can help by tracking prices and telling you when to pull the trigger by sending you email alerts and recommendations. You can read the full story here. The piece notes that Shopobot is planning to branch into home appliances, sports and other areas. Let’s hope it’s considering shoes.
Have a great week!
Jean
