Monday’s need-to-know money news

Today’s top story: 5 ways to reduce credit card interest. Also in the news: Holiday hosting tips to be safe, holiday tipping guide, and the pros and cons of using debit vs. credit cards.

5 Ways to Reduce Credit Card Interest
Escaping the interest trap.

Holiday Hosting Tips to Be Safe, Insurance If You’re Sorry
What’s covered under your homeowner’s insurance.

Holiday Tipping Guide: Whom and How Much
Showing appreciation.

Pros and Cons of Using Debit Vs. Credit Cards
Differences to keep in mind.

Thursday’s need-to-know money news

Today’s top story: Americans favor debit over credit for their go-to card. Also in the news: How to choose a cash-back credit card, how to get an SBA disaster loan for your business, and the costly mistake people make when using debit cards.

Americans Favor Debit Over Credit for Their Go-To Card
The results are in.

How to Choose a Cash-Back Credit Card
What you should look for.

How to Get an SBA Disaster Loan for Your Business
Help after Harvey.

One-quarter of people make this costly mistake when using debit cards
Are you one of them?

Monday’s need-to-know money news

Zemanta Related Posts ThumbnailToday’s top story: Why you should ditch your debit card. Also in the news: Knowing when it’s okay to co-sign for a loan, how much credit card debt is too much, and 3 common mistakes when choosing an insurance plan.

5 Expert Reasons to Ditch Your Debit Card
Why some believe credit is better than debit.

How to Know When It’s OK to Co-Sign a Loan
Do a little soul-searching first.

Do You Have Too Much Credit Card Debt?
How much is too much?

Choosing an insurance plan: 3 common mistakes
Looking beyond the deductibles.

Not to make you paranoid, but…

Zemanta Related Posts ThumbnailIt’s bad enough that tens of millions of Americans’ financial and personal data got hacked in recent database breaches (Target, Michaels and Neiman Marcus have admitted breaches, and more may be on the way).

But this week we learned that you’re much more likely to be the victim of identity theft these days than you were even a few years ago. From Kathy Kristof’s post on MoneyWatch:

If your data had been stolen three years ago, you only had about a 10 percent chance of falling prey to identity thief. Today, one-third of those who are affected by a security breach become victims of identity theft, according to Javelin Strategy and Research, which has done comprehensive annual studies of identity theft since 2006.

If your debit card information was stolen, the chance is even higher – 46 percent of consumers with a breached debit card in 2013 became fraud victims in the same year, according to the Javelin study.

As I wrote earlier, you should demand a new debit card (one with a new number) and change your PIN if you used your card at any of the affected retailers. Same goes if you used a credit card, although you have more protections from fraudulent charges when you use that type of plastic.

And you need to be vigilant. Scrutinize your statements and question every charge you don’t recognize. Beware of emails and phone calls purporting to come from your bank, your credit card company, even the IRS. The Target breach included email addresses and other personal information that could be used to deceive you.

If you really want to make yourself paranoid, watch this short video that shows how much data we leak in a typical day. It’s an eye-opener.

Debit cards can be riskier than credit cards

Dear Liz: I’m in my early 30s and never carry cash. I charge everything on my debit card. This seems to be a topic of discussion in my office. My co-worker keeps getting his identity stolen and says that using debit cards to pay for everything wreaks havoc on your finances. He says I should use my credit card instead. I just finished paying off all the expenses that creep up when buying a house and really don’t want to start using credit cards again. I don’t think I’d be as good as keeping track of where my money goes when it’s not coming automatically out of my account. But I don’t want to end up losing it all now that identity theft is running rampant. What’s the best solution here?

Answer: What you like most about your debit card — that the charges come directly out of your checking account — is also its greatest flaw. A bad guy who gets access to your account can drain it, and you’re left fighting to get your money back.

Contrast that with fraud on a credit card: You’re not required to pay the disputed charges while the credit card issuer investigates.

That doesn’t mean you should never use a debit card, but you should avoid using it in higher-risk situations. Using a debit card for online purchases isn’t smart, because your computer could be compromised with malware and because merchants often store purchase information in less-than-secure databases.

You also shouldn’t hand your debit card to anyone who could take it out of your sight, such as a waiter at a restaurant, since that person can swipe it through a device called a skimmer to steal the card’s relevant information before handing it back to you. Gas stations and outdoor ATMs can be risky as well, since criminals can more easily install devices to swipe your information than at more protected, better supervised locations.

Even at trusted merchants, though, things can go wrong. Tampered debit card terminals at Michaels craft stores allowed thieves to access customers’ bank accounts.

Using a credit card clearly has advantages, and doesn’t have to be an invitation to debt. Most issuers allow you to set up text and email alerts that let you know when balances exceed limits you set. Apps on your smartphone can help you keep track of charges as well.

Vigilance is the key to limiting the damage caused by identity theft. You should review transactions regularly on all your credit and bank accounts, regardless of what method you choose to pay.

Finally, keep in mind that debit cards do nothing to improve your credit scores, since debit cards are not attached to credit accounts. Light but regular use of credit cards can help achieve good scores, which in turn will save you money on mortgages, auto loans, utility deposits and, in most states, insurance premiums. You don’t need to carry a balance to have good scores, so exercising a little discipline in tracking your balances and paying them in full each month can save you money.

5 debit card don’ts

ShopSmart, the excellent magazine from the publishers of Consumer Reports, just came out with a list of ways you shouldn’t use your debit card. Among them:

1. Don’t use your debit card for big purchases or when you shop online. Credit cards can serve as a middleman in disputes, so you’re typically not out any money if there’s a problem.

2.  Don’t take your debit card on trips. Credit cards often have travel insurance; debit cards don’t.

3.   Don’t use a debit card if you’re worried about getting ripped off. You have more protections under federal law with a credit card. You’re only responsible for up to $50 in unauthorized purchases, and credit cards typically waive that small amount. “With a debit card, you can be out $500 if you don’t report the theft or loss of your card or PIN within two business days of discovering the problem,” the magazine noted.

4.      Don’t rely on a debit card if you want to raise your credit score. Debit cards don’t build credit history. Credit cards do.

5.      Don’t use your debit card if you want to earn money on purchases. Banks have eliminated or reduced most debit card reward programs, while many credit card issuers have enhanced theirs.

Prepaid cards aren’t a great choice for travel

Dear Liz: I have been granted a Chapter 7 bankruptcy discharge of all my debts. I’m now debt free and plan to stay that way. I’ve been saving like crazy and have enough to afford a cross-country driving trip to attend my son’s wedding. I’d like your advice on using prepaid debit cards to cover expenses such as fuel, food and lodging. My plan is to load each of three cards with an amount of money to cover each category of expense, based on my best research estimates, as a means of controlling how much I spend. If you feel this is a good plan, which would be the best brand of card to use?

Answer: Your determination to stay out of debt is admirable, but prepaid cards are problematic. You don’t have the same federally mandated consumer protections you have with a debit or a credit card, so merchant disputes or a lost or stolen card can wind up costing you big time.

Furthermore, these cards can be expensive. You often pay to activate the card, to load it with cash and to access the cash in transactions. Card comparison site NerdWallet.com studied 40 popular prepaid debit cards and found that the average card cost nearly $300 annually in basic fees. Monthly fees of up to $14.95 took the biggest toll, but $1 to $2 fees per transaction and for ATM use could easily cost a typical user more than $20 a month.

If you’re convinced prepaid cards are the best money-management tool for your situation, though, you might want to choose the American Express Bluebird, which was dramatically less expensive than its competitors in the NerdWallet study. The Amex card charges no monthly or per-transaction fees and allows for direct deposit. ATM withdrawals cost $2 apiece and cash reloads are just a buck, compared with an average of $4.50 with other cards.

Eventually you may want to look into getting a secured credit card to help you rebuild your credit scores, since prepaid cards won’t help with that. A secured card is one in which you make a deposit at the issuing bank, usually between $200 and $1,000, and get a card with credit limit equal to your deposit. You don’t need to carry a balance on these cards, but you do need to have and use credit if you want to rehabilitate your battered credit. NerdWallet recommends the secured cards issued by Orchard Bank and Capital One.