Suze Orman, one of the most well known personal finance gurus in the media, announced a few days ago that she had created, and was releasing, a new prepaid debit card.  Prepaid debit cards, if you’re not familiar with them, are cards, like credit cards, where you prepay and then can only use the card for amounts up to what you’ve prepaid.  In most cases, they are marketed towards people who are unable to get credit cards because of bad credit.

Phil, from PT Money, blasted Suze for the card, on his site and on twitter.  I can’t say that I entirely disagree with him.  His problem with the card, and mine, is that prepaid cards should be a last resort for people who are unable to get a bank or Credit Union account that has a debit card attached to it.  What Suze is doing with this card, however, is pushing it to the general public who really have no use for it, and, by using it instead of a debit card from their bank or CU, are going to be lining the pockets of Bancorp (the bank behind the card) and Suze.  That’s shady, when you are claiming to be “America’s Most Trusted Personal Finance Expert”.  If she is an expert, she should know better. And, I think she does.  Which is why, instead of responding to PT (and others) on Twitter with a factual defense of the card, she had this to say:

Suze Orman Calls PT Money an Idiot

Terrible way to take criticism, Suze.  To some degree, I discount her response because of the “sassy” way that she responds to questions and such on her shows, but I think she crossed the line here.  It’s one thing to tell the guy who calls in and asks if he should buy a new car when he’s 500k in debt an idiot, but another thing altogether when you’re calling a guy an idiot simply because he thinks your new prepaid card is a bad product.

Is the card a bad product? To Suze’s credit, unlike some prepaid cards that have had celebrity endorsers, this one has plenty of good things going for it.  It includes a credit watch program, and a free credit report with credit score.  It’s got a program to allow you to put money into a separate account for an emergency fund, free bill pay, and the ability to transfer money from one cardholder to another.

But, my Credit Union has all those things.  A $3/month fee on the card isn’t the worst of the cards, but it’s still a fee.  $36 a year to have access to your own money via a debit card?  Come on.  Again, my Credit Union does that, and they do it for free.  Yes, there are some who are unable to get a bank account.  And for those people, if you absolutely need to have access to a Visa/Mastercard card, then go for it.  But, despite what Suze is claiming, don’t expect it to improve your credit score.

There is no way that any of the credit agencies are going to take your activity on a prepaid card into account.  They’ve never taken your cash spending habits into account, and a prepaid card is no different than spending cash.  Would it be nice?  Absolutely.  Many of us who make most of our transactions on debit cards or with cash would agree.  But, it isn’t going to happen.  Your cash spending has nothing to do with your credit, so why would a credit score take that into account?

I just don’t see enough difference between this, and other similar cards to say that Suze went out on a limb here and created a product that is going to change the industry.  As a prepaid card, it’s decent.  There are better.  In the end, it’s still just a prepaid card that should be used as a last option when you can’t/won’t get a bank or credit union account with a debit card.

Read what some other Personal Finance Bloggers are saying:

Suze Orman’s “Approved Card” gets Denied; Thinks PF Bloggers are Idiots

Suze Orman’s new prepaid debit card: The Approved Card

My two cents on Suze Orman and her prepaid card

Young, Gullible, and Broke: Suze Orman’s debit card FAIL

Suze Orman’s prepaid debit card scam

Suze Orman’s Card is Not Approved by Me

Suze Orman’s Approved Prepaid Debit card is Bad for Consumers

Suze Orman Shows True Colors with Her Approved Prepaid Debit Card

And that’s just a smattering of the posts on the subject.  I have yet to come across one that is entirely positive about the card. What do you think? Do you think that Suze did a good thing here, or is it just another way to milk some money out of her followers?

This post provided by Money Supermarket.

People have often been told that investing in a home is the best thing they can do. In the recent financial crisis many people have found this not to be true. The reason for this is that so many lenders gave loans to people who were simply not qualified to carry the kind of mortgage payments that were required. Many people bought homes that were out of their price range but were lulled by easy loans with very little or no down payment required.

There were lenders giving loans for bad credit that should never have been approved in the first place. While owning a home is still a good choice it should not be considered as the sole investment vehicle. Housing prices can go down as has been proven in the last few years.

Only buy the kind of home you can reasonably afford to make payments on and never be lulled into signing loans for bad credit that are ultimately not sustainable for your budget.

Getting Your Credit Score

Obtaining a credit card has often been viewed as a bad thing. Many financial advisers told their clients to always pay cash and to never carry debt of any form. While it is never a good idea to be drowning in debt, a little debt can actually be useful. Credit cards can give you a credit score. When you make regular payments your credit score goes up. As a result of this it is easy to obtain loans for cars and mortgages that offer a good interest rate. If you have never had a history of credit and pay for cash with everything, then it may be very difficult to obtain a loan when the time comes.

Lenders want to see a history of consistent payments whether it is for a student loan or a credit card, so they know you are a good credit risk. Speaking of student loans, it has been advised in the past to take out the biggest loan and invest in the best possible school. This leaves graduates with huge student loans that can take decades to repay. It is far better to go to a modestly priced school and only obtain a small loan, while supplementing this with a part-time job.

How To Get Rid of High Interest

People have been advised to never take money out of their 401(k). Now it is thought that using this type of loan is actually very useful when it is used to pay off high interest credit cards. Paying off high interest rate debt faster is one of the best things anyone can do for their finances. If you know the rules for taking out a 401(k) loan and have a plan to pay the money back, it can make financial sense.

Using home equity loans for paying off credit cards has been advocated by many. This can make sense since credit card interest is usually much higher than home equity rates. It can also make people more vulnerable to carry debt as a lifestyle. It can leave individuals more open to bankruptcy and foreclosure too. Paying off high interest rate credit cards is important but as already pointed out in the article, there are other ways to do this.

The Beating Broke Guide to Your Credit Score is a guide that I wrote a while back, that has been available as a download here on the site as a .pdf document for some time.  With the recent rise in usage for ebook readers, I thought it was time that it got converted over and presented as a kindle ebook.  So, that’s exactly what I did last weekend.  It’s not available in the Kindle store on Amazon for only $0.99.  It’s still available as a pdf download here for free, if that’s what you want, but I know some would rather have it directly on their reader.  It’s also been made available in the epub format (also $0.99) on Smashwords.

The banking and credit card reform laws were supposed to help us – and they did in many aspects – but one of the unintended consequences is that banks are making up for the lost revenue sources by creating new ones… fees, fees, and more fees!

I just closed my brokerage account from BoA/Merrill Lynch because they started charging a $50 “maintenance fee” twice per year – when I opened it years ago, I remember it was advertised as something that would always be free… not anymore! I also closed one of my credit cards from American Express that started charging an annual fee. However worse yet is being charged for a checking account, since that is something so essential to our lives and historically (at least in recent history) we’ve all become accustomed to not paying for it.

Fortunately though, we don’t have to be stuck paying these fees. When it comes to checking accounts, there are a few different ways to weasel out of them which I will discuss below:

#1 – The direct deposit trick
The exact rules vary by bank but with many, if you have direct deposit setup, your checking account fee will be waived. But what happens if your employer doesn’t offer direct deposit or you are self-employed?

Well I found a trick that has been working great for me so far. I have a brokerage account (different from the one I closed) and it allows me to setup automatic withdrawals or deposits. I have arranged for it to direct deposit $1 every month into my BofA checking, thus meeting the direct deposit requirement to get free checking. I’m going on year 3 or 4 of using this technique and so far it’s worked beautifully! However please note that some banks require a minimum amount for direct deposits to qualify.

#2 – The waiver for multiple linked accounts
With some banks, if you have multiple account types – i.e. checking, savings, and/or brokerage – you will automatically be exempt from checking account fees.

For example with Charles Schwab bank, in order to get free checking you have to have it linked to a Schwab brokerage account. Don’t have a need or desire for a broker account? No worries, because the rules don’t actually require that you use it or have money in it. So basically, you could just open up a broker account and never use it.

#3 – The minimum account balance waiver
The most common and well-known technique to get free checking is to maintain a minimum account balance. If you can afford to do it (usually $1,500 to $5,000 depending on the bank) then the fee for your checking account is waived. However if money is tight right now and this isn’t an option, then I would recommend one of the other four strategies.

#4 – Use the bank’s debit or credit card
Some banks offer to waive the checking account fees if a certain number transactions are made each month using an affiliated debit or credit card.

For example, you would normally be paying eight bucks a month for the basic account from Citi. However if you use the account’s debit card for at least five transactions per billing cycle, then the fee will be waived. Of course the drawback to this is that you may be missing out on travel rewards or cash back rewards you get with your credit card, but Citi doesn’t have a dollar requirement on the debit card purchases, so if you prefer just use it for five small purchases (and your preferred card for everything else).

#5 – Switch to a credit union or smaller bank
Last but not least, if you don’t want to play these games with your big bank, then you should think about switching over to either a community credit union or a regional bank. Because they’re the underdogs in the banking world, they are usually much more likely to offer free checking accounts (and without any hoops to jump through). I know switching banks can be headache because you might have your online payments all setup with your existing account, but just remember, making the switch may save you around $100 to $150 per year in fees!

This post comes from guest blogger Mike, founder of the message board/blog, CreditCardForum. He writes credit card reviews (most recent being the AmEx Blue Cash Everyday) and everything else on the site comes from forum members. Despite his borderline OCD obsession with cash back and rewards, he stresses that anyone who doesn’t pay their balance in full every month should avoid credit cards like the plague!

If you’re one of the millions of people that has been negatively impacted by the global financial crisis, then you may find that your credit rating has suffered. Realize though that no amount of good advice can be a replacement for responsibility. Living within your means and giving a proper amount of deference to your financial situation will always be better than trying to pick up the pieces after a meltdown. Still, a lot of responsible people have been suffering lately due to no fault of their own, and if you find yourself in this group you will be able to reestablish your credit and recover. In this article we explore what options you have available to fix your bad credit.

1. Apply for a Secured Credit Card
   These types of credit cards require that you keep some collateral, typically $100-$500 in an account. The nice thing is that after about a year of doing this you can upgrade to a regular credit card. Make sure to check for any hidden fees and that the issuing lender reports to all 3 of the major credit agencies before you apply.
2. Make Sure All of Your Debts are Paid Off
   If you have recently been denied credit then you are entitled to a free copy of your credit report from one of the three major credit reporting agencies (Experian, Equifax, and TransUnion). These agencies also offer a one-time deal, so if you can, take advantage of that as well. Make sure to pay off any outstanding debts and to challenge anything on there that you did not legitimately incur. It is also possible to write the lenders asking for forgiveness, and have them remove bad marks against you, but it’s not quite standard procedure for them to do so.
3. Watch Out for Phony Credit Reduction Scams
   There are some legitimate non-profit credit counseling services available that can act as a middle man in dealing with creditors and help you to reduce your debt. There are also a ton of scams out there that will do nothing but put you deeper into debt. Make sure to thoroughly research these types of services before using them.
4. Get a Small Loan to Help Build Your Credit Further
   Once you are able to reestablish a line of credit, and are paying it off on a monthly basis, don’t expect lenders to just automatically open their coffers to you. Factors they will take into account typically include your monthly income to debt ratio, how much debt you have tied up in high interest accounts, how much savings you have, your credit history for the last 7 years, and other issues related to stability like the number of residences you’ve had.

Make sure to explain the circumstances that lead to your financial troubles, and don’t forget to mention things like you were 1 of several thousand workers to be laid off at your job, or that the company has gone out of business. The better you are able to show the lender that you are financially responsible, the better luck you will have at getting a loan.

Bio: Alexis Bonari is currently a resident blogger at College Scholarships, where recently she’s been researching trade school loans as well as Toyota scholarships. Whenever this WAHM gets some free time she enjoys doing yoga, cooking with the freshest organic in-season fare, and practicing the art of coupon clipping.

To rebuild your credit score, you must add positive information to your credit report. Knowing the exact type of information to add will ensure you’re taking the right steps toward complete credit repair.

New Credit Accounts

If you can’t get all the negative information erased from your credit report (and sometimes it’s better if you can’t), you need to overshadow it with positive information. The more credit accounts you can add to your credit report the better. But, be careful not to apply for too many credit cards or loans in a short period of time. Lenders will start getting suspicious about the number of applications you are making and will start turning you down.

On Time Payments

Payment history has the biggest impact on your credit score. Delinquent payments are likely what caused your credit score to drop, but unfortunately, the same number of positive payments won’t restore your credit score. Instead, it will take dozens of months of timely credit card and loan payments to bring your score up. But, in time, your score will recover as long as you continue to pay on time and never miss a payment again.

Low Balances

When you get new credit cards, it’s not time to go on a spending spree. Instead, you should only charge a small part of your credit limit – like 30% or less. On a credit card with a $1,000 credit limit, keep your balance below $300. Another large part of your credit score (30%) compares your credit card balances to your credit limit. Using too much credit hurts your credit score.

Some people charge a large balance and pay it off before the grace period thinking that will save them from the damage. That won’t necessarily save you from the damage of a high credit card balance because you don’t know when the credit card issuer will report your balance to the credit bureau. If your balance is reported while your credit card balance is high, your score is still affected even though you pay off your balance.

Get Different Types of Credit

Credit cards are just one way you can improve your credit score. Another part of the credit score calculation considers the types of credit you have experience with. If you don’t have any installment loans on your credit report, getting new ones will help you. But, make sure you take out loans only as needed and not just to improve your credit score. Only borrow a loan that you can afford to repay to protect your credit score.

Many credit repair resources recommend you borrow a passbook loan, place the loan in a savings account, and then use what you’ve borrowed to repay the loan. Before you pursue this option, make sure the lender actually reports these loans to the credit bureaus because many of them don’t. If the loan payments aren’t reported, they won’t help your credit score.

The key to successful credit repair is adding more and more new positive information to your credit report. Over time, you’ll see your credit score improve.  Maybe you’ll need a free credit score estimator.

Frank Collins is a writer who specializes in personal finance issues. His articles bring insight into all kinds of financial dilemmas. To read more of them visit his credit repair blog.

Everybody knows that you want to have the best credit score you can.  Why?  Because the better your credit score, the better the rates you can get on your loans, of course!  But, did you know that there are other reasons to try and improve your credit score?  In fact, here’s five ways that having a better credit score can lead to better finances.

1. More money.  This is the obvious one.  A better credit score leads to better rates on loans (see above), and better rates lead to less interest paid over the life of the loan.  And less interest paid leads to…  (wait for it) a  better bank balance!
2. Better rentals.  It’s a sad fact that many landlords are doing credit checks on prospective tenants these days.  They’ve got assets to protect, so it’s a smart move for them, but the fact that there are so many landlords out there getting burned that it’s become necessary is sad.  But, having a good credit score can help make sure you don’t get turned down for that great apartment down by the beach!
3. Quicker payoff.  This one goes really closely with the first point.  With those lower rates, and lessened interest also comes the ability to pay the loan off quicker.  And, of course, a quicker payoff means a much better financial situation.  Especially if you avoid any new loans afterward.
4. Any loan you like.  If you must loan money, at least do it smartly.  With the current state of affairs, you can’t just walk in and get a loan that has a pulse as it’s only requirement.  In fact, many banks and credit unions are cutting way back on their sub-prime lending for anything.  (P.S. the term “sub-prime” doesn’t just apply to mortgage loans) If you have poor credit, it’s much more likely, today, that you’ll get turned down for a loan altogether.  Better credit means that if you really need a loan, you probably can have one.
5. Less fees.  We all hate fees.  Well, all of us except the financial institutions.  A growing number of them are making a growing amount of their revenues from fees.  And many have moved to an account structure that is based off of risk.  And risk is determined by credit score.  A lower credit score could mean an account with higher fees, or with monthly fees that some accounts might not have, while a higher credit score might qualify you for a different account without those fees.

So, you see, having a good credit score can really send your finances in the right direction.  And, having a bad credit score can really send them into the dumps in a hurry too!  Unless you’re very dedicated to the extreme frugaler lifestyle, and never plan on really using money, it still pays to have a good credit score.  It doesn’t take much to build it, and you might be glad you did someday.

photo credit: o5com

What if you couldn’t use a credit card.  What if you couldn’t get a loan?  Imagine a world where “credit” as we know it no longer exists.  Or never existed in the first place.  Would that world be better or worse than what we live in now?

In many ways, credit that is used wisely can be a benefit to our lives.  It allows us to get a house without having hundreds of thousands of dollars in cash available.  It allows us a car without having to have tens of thousands available.  I know, if you purchase smartly and within your means, you don’t need hundreds of thousands of dollars for a house and you don’t need tens of thousands for a car.  But, for those that feel that they can afford to pay those payments, credit makes it all possible.

What would a world where there was no credit look like?  Instead of spending our last dollar to pay off the loans we get with our credit, we’d spend more of our time working for fulfillment.  If we didn’t have the ready cash available to pay for something, we’d have to save for it.  Or trade for it.  And we’d do more for ourselves.  We’d mow our own lawns.  We’d do our own handyman work.  Do-it-y0urself tasks wouldn’t be something of a novelty, but more of a normal thing.

For some, it may seem trivial.  What difference does it matter whether I use credit or not.  I’m responsible and pay my bills, they’ll say.  And then, they’ll get up on Monday morning and go to the job that they’ll freely admit they don’t like much, but they keep it because it pays well.  But, if there was no credit, they wouldn’t need a job that pays well.  They probably wouldn’t need any resume tips. They’d have the ability to find a job that they enjoy.  A job that is fulfilling and rewarding.

And that makes a difference.  The stress and turmoil that a job you don’t like can bring into your life is not only unpleasant for you and those around you, it can actually be fatal.  Without credit, keeping up with the Joneses becomes a thing of the past.  You only need to keep up with what skill sets they have that you don’t and find an amicable trade.

Will this world ever exist?  Wholly? No.  There are way too many hands in the pot of credit for it to ever go away.  Too many millionaires made by taking advantage of other people through credit.  But, that doesn’t mean that you and I can’t strive to lead our lives in the direction of no credit. We can take control of our finances through good financial management principles and lead a life as free from credit as possible.  And, it is possible.  Don’t be afraid to dream of that.  And don’t be afraid to guide your finances with intention.

Breaking free from the harness that we’ve given ourselves can lead us to a better life.

photo credit: TheTruthAbout

With all the news lately about people “walking away” from their mortgages, increasing bankruptcies, and debt consolidation/repayment schemes, I got to thinking about what the obligations of the buyer are.  And, also, the ways that we as a society have made it easy to sidestep those obligations.

Obligations

What are our obligations when we buy something?  Does buying a pack of gum carry different obligations than buying a house?  Naturally, we have obligations to ourselves as to the upkeep and use of that which we buy.  If I buy a house, I have an obligation to myself to do what I can to make that house last as long as possible and remain structurally sound.  If I buy a pack of gum, it’s a lesser commitment, but that obligation still exists as an obligation to not let my purchase go to waste and either chew the gum or give it to someone to chew.

What obligations to we have to the seller when we buy something?  There are two ways to look at this.  The first scenario involves paying cash for something.  If the full purchase price that was negotiated is satisfied, I don’t believe you have any obligation to the seller.  However, if the purchase involves debt of some sort, there are obligations that arise.  If you purchase with a credit card, there is an obligation to pay that debt to the credit card company.  The same is true for a mortgage, a car, and even a pack of gum.  Not only do you have an obligation to pay the debt, but you also have another obligation to yourself to learn what that debt is going to cost you.  This last obligation is the one that was most ignored during the fiasco that we like to call a housing bubble.  Many ignored the facts of what their new houses were going to cost and bought them anyways.

Sidesteps

In the pursuit of a consumerist society, these obligations can sometimes get in the way.  If I ignored the obligation to know the cost of debt and bought a house anyways, I likely entered into an agreement to pay a mortgage company a set amount each month.  Recently, it’s become popularized to demonize the banks that lent the money to people as the sole problem and, as a result, it’s become no big deal to merely “walk away” (default, or stop paying) on a mortgage.  The reasoning follows that it’s better to default on the mortgage than remain paying on a house that is worth less than what the purchase price was, or that has had payments adjusted higher.

In the same way, the obligation to pay credit card bills, auto loans, and most other consumer debt has been sidestepped.  It’s no longer a social stigma to declare bankruptcy.  Many, knowing they are about to file for bankruptcy, will go out and max out their credit lines in anticipation of the bankruptcy cleaning the slate.

As these sidesteps become more and more common, the social stigma will decrease even further.  If everybody is doing it, it’s hard to demonize something.  You might demonize your friend.  Or relative.

Of course, this isn’t to say that defaulting on a mortgage should never happen.  Or that bankruptcy should never be declared.  It happens.  It’s the rampant social acceptance of these situations that is troubling.  What happens when it becomes commonplace for mortgage borrowers to default?  The loans become more expensive.  The banks have to cover their costs to repossess the house, the staff to service the loan, and associated costs with trying to resell the house.  Where is that money going to come from?  They aren’t going to just pay it out of the kindness of their hearts.  They’ll pass it on to the customer.  Suddenly, mortgages will become even more front loaded with fees and interest.  When bankruptcies become more commonplace, credit availability is going to decrease.  We’ve already seen that recently.  People who could easily get a credit card before will be denied.

All of this is all the more reason to avoid debt whenever possible.  If society isn’t going to do it, hold yourself to your obligations as a buyer.  Obligate yourself to paying off your debt.  Then, obligate yourself to paying in cash from then on.

photo credit: EJP Photo

Building credit is a phrase that you’ll see around the Internet and anywhere most financial experts talk.  It’s basically the act of getting a loan with easily repayable terms, or piggybacking on someones loan, in order to create a positive record on your credit report and thus increasing (building) your credit score.

But, for many, it’s a fallacy that acts as another trap in the debt cycle.  Here’s the scenario.  You need to build your credit.  So, on the advice of a few friends or experts, you go down to the bank and get a $300 loan.  It’s all they’ll give you, and the interest rate is way more than you should spend.  But, you don’t plan on spending any of the money, so you’ve just got to come up with the payments with the added interest and viola! A shiny new positive mark on your credit report.  Except.  Except that after about 2 months, you get a flat tire.  Or you’re favorite band comes to town.  Or your friends want to go out on the town.  Something comes up and you need some money.  You don’t have any.

Where do you get your money?  Why from the loan, of course.  You’re gonna pay it off anyways, right.  So, you’ll just have to scrape together a bit more for the next payment, that’s all.  Except.  Except, you don’t scrape together that money.  You use the rest of the funds to pay the next few months payments, but you come up short.  You still need to scrape a few dollars together to make the last few payments.  How’d this happen?!?  It must have been those parasitic lenders, right?

Not quite.  You did it to your self.  And instead of a shiny new positive mark on your credit report, now you’ve got new delinquencies.  And eventually, maybe a nice new collection note.  All because you thought it would be nice and easy to build your credit.  You fell victim to the fallacy.

It doesn’t have to be that way.  Many people pull this off, but it takes a mindset as well as the money.  If you attempt to do something like this, but you don’t have your whole mind in it, you stand a high risk of ending up with negative marks instead of positive ones.  But, if you’re determined to stay out of debt at whatever cost, you can make it work.  It means you can’t touch that money for anything.  No drinking with friends, no Bieber concert, and no new tires.  If you want to improve your credit score, and you’re in a situation where this is the only solution, you’ve got to be ready to make a few sacrifices.

Take a step in the right direction, take responsibility for your actions, and do the financially sound thing.  Building your credit can be that easy.  It’s not a easy task, but once you’ve built it long enough and high enough, maybe you can continue to build it with a nice used car loan of a couple thousand.

Image Credit: credit report by TheTruthAbout…, on Flickr