Wednesday’s need-to-know money news

Today’s top story: How to make the most of the Child Tax Credit this year. Also in the news: 4 reasons to ditch your old debit card, getting to know your 401(k) plan, and how to choose the best tax software.

How to Make the Most of the Child Tax Credit This Year
The tax credit is doubling for 2018.

4 Reasons to Ditch Your Old Debit Card
New card, new perks.

Get to Know Your 401(k) Plan
Everything you need to know about your retirement savings.

How to Choose the Best Tax Software for You This Year
DIY vs finding a pro.

Use a credit card like a debit card to avoid debt

Dear Liz: Here’s a suggestion for the reader who prefers a debit card to a credit card so she will not get in debt: Use your credit card as a debit card. Every month I pay any credit card balance plus an additional amount equal to a month’s average purchases. Then I keep track of what I spend so I don’t go over that amount during the billing period. This is the same as paying the bill one month ahead. I don’t go into debt at all and still get my reward points.

Answer: Another way to accomplish the same end is to check your credit card balance every week and move that amount to a savings account. When the bill is due, you can move the money back to checking from savings and pay in full. It’s important in any case to stay on top of your balances and make sure you’re not spending more than you can pay off each month.

Protect yourself from holiday credit card fraud

GiftHoliday shopping means more opportunities to whip out your plastic—and more opportunities for thieves to try to steal your identity. Here’s what you should do.

Be vigilant. If you haven’t already, sign up for online access to your bank and credit card accounts. You should be reviewing your transactions at least weekly.

Be reachable. Update your contact information so your issuer can reach you quickly in case they spot fraud.

Be alerted. While you’re at it, sign up for alerts. Most issuers allow you to get a text or email alert for large or overseas transactions.

Beware fraudulent deal sites. Their eye-popping bargains may just be a way to get your credit card numbers. Stick with the real deal, like DealNews.

Be diligent. Install and update anti-malware software.

Be smart. Use your credit card rather than your debit card in high-risk situations, as I wrote in “Debit cards can be riskier than credit cards.” If you must use a debit card, sign for it rather than using your PIN since that typically offers you better protection against fraud.

A good prepaid card? It’s no longer an oxymoron

Credit card backgroundFinally, there’s a prepaid card that may deserve a place in your wallet.

The American Express Serve card eliminates, or at least makes it easy to avoid, most of the niggling fees that make typical prepaid cards a bad deal:

  • Users will be able to load the card with cash for free at 14,000 CVS and 7-Eleven stores, according to Stefan Happ, Amex’s senior vice president for U.S. payment systems. (The usual procedure involves a reload fee of $3 to $4, and it’s a hassle: you have to first buy a reload card at a store, then call a toll-free number or go online to add the money to your account.)
  • ATM withdrawals are free at 22,000 MoneyPass network machines. The fee for out-of-network withdrawals is $2. That compares favorably to the $2.83 to $2.88 the average prepaid card charges, according to NerdWallet.
  • There is a $1 monthly fee that can be waived if you use direct deposit (have paychecks or government checks loaded directly onto the card). The fee is also waived if you load at least $500 that month.
  • Getting a card is free through the end of the year; after that, buying one will cost $2.95.

The card has a bill pay function and will have mobile check capture (where you can take pictures of checks to deposit them) later this year.

And get this…the card even has a savings account, called Reserve. You can set up one-time or recurring transfers that can help you save up for a purchase or get started on that all-important emergency fund.

American Express has a similar product called Bluebird, developed with WalMart, which provides free cash reloads at its stores. Not every community has a WalMart, however (shocking, I know)—New York City being one example of a WalMart-free zone. Bluebird has been singled out, by NerdWallet and others, as one of the best prepaid cards; Serve makes a good thing even better.

This is the first card I’ve seen that could actually be a viable alternative to a real checking account. That’s the audience Amex is targeting, of course: the tens of millions of Americans who are “unbanked” or “underbanked.” Many either can’t get an account or have given up on traditional banks because of all the fees. But because so many cards have hidden or less obvious fees—reload fees charged by third parties, or ATM surcharges—they often wind up paying more than they might at a consumer-friendly

“We want to be consumer advocates,” Happ told me. “We really put our money where our mouth is.”

Normally I’d dismiss that as PR happy talk. This card, though, delivers on the premise.

It’s also a decent alternative for delivering allowances to teenagers. Happ has set up two subaccounts for his daughters (who are over 13, the minimum age for such subaccounts), and delivers their monthly allowance to them via Serve cards.

The one bummer—it’s an American Express product, so it’s not accepted everywhere that Visa and MasterCard are. I haven’t experienced that as a huge problem; most stores I use accept Amex, and typically the only time I have to pull out an alternative I’m at a smaller independent store or a doctor’s office. But it’s something to keep in mind.

Are prepaid cards good for an allowance?

Dear Liz: My son is 12 and receives a regular monthly allowance that I’ve been giving to him in cash. I think it might be time for a checking account. I would like to teach him about using a debit card and not overdrawing his account. All the banks that I have called will not open an account for a minor, even a joint account. I’ve heard about prepaid cards being used for allowances, but I’m concerned about the fees.

Answer: You’re right to be concerned. You wouldn’t be teaching financial responsibility — the whole point of an allowance — if you gave him a prepaid card larded with fees to access his own money.

Prepaid cards, also known as prepaid debit or reloadable cards, typically aren’t linked to a checking account as regular debit cards would be. Instead, you can “load” them with cash in a variety of ways and then use the card to spend that money wherever regular debit cards are accepted. Many prepaid cards also can be used to withdraw cash at ATMs.

Unfortunately, many issuers charge fees to open, use and close their cards. Monthly “maintenance” fees and fees to replace cards or talk to customer service are common. Some of the most expensive cards are the ones endorsed by celebrities. Those marketing expenses have to be recouped somehow, and fat endorsement contracts often seem to be paid for with higher-than-average fees.

Anisha Sekar, vice president of credit and debit products for card comparison site NerdWallet, recommends two cards for allowances: the Bluebird from American Express and the Chase Liquid.

The Chase Liquid card doesn’t charge most of the usual fees. There’s no fee for activating a card, closing an account, getting paper statements or paying bills. The card can be loaded with money for free at a Chase bank branch or Chase ATM. Withdrawing cash at a Chase branch or Chase ATM is also free. The monthly fee is $4.95, but it’s still one of the cheapest cards available, she said.

The Bluebird doesn’t charge a monthly fee, and activating the card is free if you apply online. The card allows free ATM withdrawals within the MoneyPass network if the cardholder is enrolled in direct deposit; other withdrawals incur a $2 fee. The card can be loaded for free from a bank account or by using cash or a debit card at a Wal-Mart. Loading with a debit card costs $2.

You’ll still face age limits, but there’s a work-around. Most cards have to be opened by someone 18 or older. A child must typically be 15 or older just to have his name on the account as a joint user. (With the Bluebird the age limit is 13.) So you would have to open the card in your own name and then give it to your son to use.

Another option may be to simply wait a year. Some national banks, including Wells Fargo and Chase, offer teen checking accounts for those 13 and older, although the accounts may not be available in all areas.