Flickr image by Get Down

New Federal Reserve rules take effect July 1^st to give consumers more protection against bank overdraft fees on debit cards. Up until now, many banks automatically offered overdraft “protection” for debit cardholders. That meant that if a debit cardholder had insufficient funds in his or her account to cover a purchase or ATM withdrawal, the bank would allow the transaction to go through, but then could charge an overdraft fee. A study of 462 banks by the Federal Deposit Insurance Corp. showed that overdraft fees range from $10 to $38, with a median average of $27.

Overdraft fees on debit cards generated more than $20 billion for banks in 2009, according to the New York Times. Banks earned another $12 billion overdrafts caused by check writing, which this law does not address.

A study by the Greenlining Institute, a think tank focused on multiethnic public policy, indicates that bank overdraft fees hit low-income consumers and people of color the hardest. That’s because people new to banking and/or with low incomes tend to maintain low bank balances. These are the very bank customers who can least afford to bear the burden of extra fees.

Under the new law, consumers must opt-in for overdraft protection on debit cards. Without it, a debit card transaction would simply be declined at the point of sale if there were not enough funds in the account to cover a purchase. For transactions that did go through and the bank would have to cover the overdraft without charging a fee. To protect their lucrative revenue stream, banks are beginning to send out alarming marketing messages urging debit card holders to opt into an overdraft service or risk not having to make payments “even in an emergency” that result in overdrawn accounts.

Overdraft Charges: Banks Game the System

The Greenlining Institute report also points out that many banks have gamed the system to maximize the fees they can collect by “reordering” purchases in a given day to count the most expensive one first. This way, they raise the chance that each additional purchase can count as an overdraft if the highest purchase of the day wipes out your account balance. For example, let’s say you have $100 in your account. You use your card to buy lunch for $10, you fill up your card for $30, you buy clothes for $50, and then you pay a bill for $60. If the bank processed these transactions in the order that they were made, only the last charge would be counted as an overdraft. But by processing the $60 and $50 transactions first, the bank then counts the $10 and $30 transactions as overdrafts and charges you two overdraft fees instead of one.

The Institute concluded that despite changes in the law, overdraft fees are still too high and continue to affect low income consumers disproportionately. With widely varying policies among banks, and hard to follow fee structures, consumer continue to be at risk for being hit with unexpected and costly charges.

Few Prepaid Debit Cards Allow Overdrafts

Because prepaid cards are not tied to a checking account, prepaid card issuers are not inclined to allow overdrafts or collect overdraft fees. This is because cardholders could potentially make a purchases with insufficient funds on a card and then fail to load money onto the card to cover the overdraft. Thus, when an attempted purchase is greater than the amount of funds available on the card, the transaction will simply be declined. This is largely seen as a benefit by prepaid cardholders. Prepaid cards are a positive alternative for consumers who have been denied checking and have trouble obtaining a credit card or other kind of debit card.

About MiCash and the MiCash Prepaid MasterCard

MiCash Inc. is a trusted resource for information about prepaid debit cards and personal finance. MiCash offers a prepaid MasterCard with low fees and 24/7 customer service.

Please feel free to republish this article including embedded links on your blog or website under a creative commons attribution copyright.

ChexSystems is a credit reporting service used by banks to weigh the risks of accepting new customers. According to bankrate, 80 percent of all banks and credit unions use the service, which is offered by a company called eFunds. If someone is on the ChexSystems list, which is regularly updated with the latest information from other banks, a bank can see the reasons why. It might be because the person bounced a check, intentionally or by accident. Or the person might have outstanding unpaid fees. Or he or she may have lied on their application.

In many cases, it’s possible to contact ChexSystems and request a copy of your listing, if you have been denied a checking count in the past 60 days. Telescan is a similar service and you can do the same for its list. It isn’t convenient or easy, but if you do not have a track record of outright fraud, it is possible to pay outstanding bank charges, and then these reporting bureaus will note that fact as part of your record.

Some banks will not accept you as a customer as long as you remain on the ChexSystems or Telescan report. Others may offer you a checking account with higher fees.

Steps for Working with ChexSystems

1. Get your report by mail or on on the web at chexhelp.com. Call ChexSystems at (800) 428-9623 or (800) 513-7125 or send a written request to:ChexSystems Customer Service
   12005 Ford Road, Suite 600
   Dallas, TX 75234-7253
   Fax: (972) 241-4772
   Local (972) 280-8585
2. If you see anything in your report that you believe is inaccurate and you wish to dispute, write a letter asking ChexSystems to verify the information contained in your report. You should also ask for copies of the backing documentation the company may have relating to the disputed listing. And don’t be shy about requesting to have the information deleted from your file.
3. Keep copies of everything you send, and consider sending them by certified mail. ChexSystems should respond within 30 days, but if they don’t you can report that fact to the Federal Trade Commision.
4. If anything is accurate in the report, but actionable on your part, such as paying off outstanding obligations, then take action to clear up the listings. Then document the change and send the information to ChexSystems.
5. If you discover that you are a victim of identity fraud, because what you see in your report has no bearing on anything you have done, then file a police report.
6. Stay in contact and send follow letters as needed to ensure that ChexSystems is actively pursuing changes to your file. And if you succeed in expunging your record, open a checking account right away.

“Snowballing” your debt is a phrase a lot of personal finance bloggers use to describe the idea of paying off your smallest debts first so you can benefit from having quick wins in seeing your debts go down. One win leads to another, and soon you are shedding debt like a snowball rolling down a ski slope. Coined by the popular get-out-of-debt guru David Ramsay, debt snowballing means essentially ignoring higher interest debt in favor of reducing the number of outstanding debts, starting with the smallest and working your way up to the largest. Ramsey writes: “personal finance is 20% head knowledge and 80% behavior.You need some quick wins in order to stay pumped enough to get out of debt completely.”

A contrasting school of thought holds that you should always start with your highest interest debt, such as high interest credit card debt. If you want to experiment with how this would work, download and use the free Debt Reduction Calculator, in Excel format, by Vertex42.

How to Curb Your Spending

Less discussed is the Spending Reduction Snowball. It was Ben Franklin who coined the phrase, “watch your pennies, and the dollars will take care of themselves.” Rather than cut out the big spending items–either because you can’t (e.g., mortgage payment, car payment) or you can’t bring yourself to do it (e.g., that trip to Hawaii), snowballing your spending habits in the downwards direction might mean passing up Starbucks in favor of brewing your own, darning your socks instead of throwing them out and buying new ones. Knocking back your cable subscription to basic.

Of course, unlike debt, you may not have an easy way to add up all of your spending. But just as the spreadsheet above works, you can easily calculate these small savings by projecting the savings out a month or a year. For instance, if you cut your cable bill by $15 a month, project your savings out a year $15 x 12 months = $180, and you’ll rightly multiply the effect of the sacrifice to put it in its proper perspective.

Or bring a notepad with you and jot down every penny you save per item when you reach for your usual brand, and then either go generic or pass it up all together. Who wouldn’t bask in the glow of passing through the check out and then realizing that you just saved $34 by shopping more frugally?

What else can you “snowball?” How about your e-mail in-box? We’ll save that for another post.

People looking for prepaid debit cards can find them at 7 Eleven stores nationwide. Or, if you already have a prepaid Visa® or prepaid MasterCard® and are looking for a way to load it with money, you can also find Green Dot® MoneyPaks at any 7 Eleven convenience store.

7-11 Store Locator

This online 7-11 Locator can help you find the nearest location. There are more than 6,970 7-Eleven stores in the U.S. and Canada. Do you know how this chain of convenience stores got its name? July 11 (7/11) is the official birthday of the business back in 1927.

• Of all U.S. retailers, 7-Eleven sells the most … USA Today newspapers, cold beer, cold single-serve bottled water, cold Gatorade, fresh-grilled hot dogs and money orders.
• Nearly one-third of the 6 million people who stop by a U.S. 7-Eleven store each day purchase immediately consumable food.

You can watch a video of how to load money by clicking LOAD MONEY in the navigation bar above.

Today, the electronic network for debit and credit card transactions is vast. Credit cards have been around since the mid 20^th century, and earlier versions even existed at the end of the 19^th century. The first ATM cards appeared in the early 1970s and were limited to allowing people to withdraw money from a checking account, but could not be used for purchases. By the 1980s debit cards emerged as an alternative to checks for making purchases with money out of one’s personal checking account. Over the past decade,   “prepaid debit cards” have become increasingly popular. Also issued by banks, they work like traditional debit cards, but are not connected to a checking account.

Now, the lines are blurring between the two forms of payment—debit or credit—for both merchants and consumers. When someone pulls out a plastic card with the MasterCard or Visa logo on it to pay for food, gas, or a store purchase, he or she may conduct the transaction using a signature, or in the case of a debit card, by entering a PIN number on a check out keypad. The signature payment method runs on a credit card network. The PIN payment method runs on a debit network. Merchants pay a fee in either case (to MasterCard or Visa) as part of their doing business.  This fee is slightly lower in the case of PIN transactions, which is why some retailers like Wal Mart and CVS Pharmacy encourage debit card users to pay by PIN.

The real difference between credit cards and debit cards has more to do with the funds being transferred. When you buy something with a credit card, you are not spending your own money but rather borrowing money against a credit line that the bank issuing the card has extended to you. The only limit on your spending is the limit imposed by the credit card company. So, when you make a payment towards your outstanding balance you are paying back the credit card company for earlier purchases.

Here’s what happens behind the scenes when you make debit card purchase. You are actually accessing your own money that is sitting in a bank account. As the transaction happens, money is transferred out of your account, travels across the network, and is transferred into the merchant’s bank account. PIN purchases happen in real time, so the amount in your account is verified and transferred immediately. Signature transactions, which travel across the credit card network, do not have to happen in real time but can happen hours later in a “batch” process with other transactions. The transfer of funds from the cardholder to the merchant can also be delayed, some times as long as two days, depending on when the batch process is executed.

So what’s the difference between a prepaid debit card and a bank debit card or ATM card? The real differences are more technical than actual. For both kinds of cards, you deposit your own money with the card account and withdraw it as you see fit, either by making ATM cash withdrawals or by using the card for purchases. A bank card or ATM card (sometimes called a checkcard) is connected to a checking account. Typically, there are no fees associated with purchases, or when using an ATM within the bank’s network. In contrast, a prepaid card is not connected with a checking account but stands alone. There is usually some fee structure in place for using the card. For example, each purchase may generate a 90 cent fee, or the card holder may pay a flat $10 per month for using the card. A prepaid card is a good choice for people who would like to get a debit card but have trouble opening a checking account.

Prepaid cards like the MiCash Mastercard are also a convenient alternative to credit cards, because prepaid cards that bear the Visa or MasterCard logo are accepted worldwide like credit cards. They are a good option for people with bad credit or a lack of a credit history, because they do not require a credit bureau check to be approved.

Flickr image by ztil301

People often want to know what is the best Student MasterCard or Visa on the market today? The truth is, with the new credit card rules now in effect, it is difficult for students under 21 to obtain a credit card without a parent co-signing on the credit card agreement. Students have to have already established credit to get a credit card. A Catch-22 if there ever were one.

So, of course we here at MiCash believe that a prepaid debit card such as the MiCash Prepaid MasterCard is a great alternative for college students who want and need the flexibility that plastic payments provide, without the dangers of going into credit card debt.

Prepaid cards can curb a student’s impulse spending on such things as beer, pizzas, and MP3 downloads (wait a minute, do they even pay for those?). The reason for this is simple. You can make purchases on a prepaid card if you have enough funds in your card account to cover your spending. Unlike writing a check that could bounce if you don’t have enough funds in your account, you can’t get overdrawn. And unlike paying with a credit card, you can’t borrow money that you don’t have. You don’t have to worry about going further into debt and having to make monthly installment payments to pay back the charges. Students will most likely think twice about every purchase and will be more mindful of their personal budgets.

A new trend is popping up: websites that help people rent things from one another instead of buying them. This is a great idea for the average Joe or Jane who will probably seldom use  half of the stuff they buy because they assume the will “need it” at some point. Think of power tools, kitchen gadgets, camcorders to take on vacation, etc.

Once upon a time, when people were less transient and you really got to know your neighbors, you might be able to walk down the street and borrow your neighbor’s extension ladder to retrieve a frisbee on the roof or clean the gutters. Or, for you kid’s annual Cub Scout’s Pinewood Derby you might get away with borrowing a buddy’s Dremel rotary sander thingy to shape your boy’s dream car from a block of pine. Now, with so much made in China and seemingly “affordable” instead you buy the tools, the gadgets, the electronics, and store them on shelves, in cupboards, and in the garage (if you have a garage), for that rare event when you may need them. Sometimes years go by before these things are touched. Sometimes you even rent a monthly storage unit to keep all this stuff. And eventually, maybe you offload it between moves in a garage sale for nickles on the dollar.

“The old paradigm of buy and use it once and store it forever is shifting to an economy based on usage and accessibility,” said Jeff Boudier, co-founder of Zilok. (From the Washington Post)

Zilok is a “peer-to-peer” social media rental site founded by a couple in France who figured out that the average power drill is used a total of only 12 minutes during its lifetime. Another is iRent2U.com. Here’s how it works. People post stuff they are willing to rent and users can rate the reputation and quality of the owners much like E-Bay merchants are rated. Renters meet the owners, sign contracts, perhaps put down a security deposit, pay a rental fee, and hopefully use and return the item in the same condition they found it.

Of course, trust is a big concern, but these sites are growing fast and features like the rating system help build trust.

What do you own that you think you might make some extra income from by renting it out? Or what might you consider renting as needed rather than buying?

If you haven’t filed your taxes yet, it’s not too late to file for an extension.

Redeeming Riches has a good post on how to file for extension.

If you do not request an extension of the IRS tax deadline and you file late, you will be hit with a Failure to File Penalty of 5% per month (up to 25%) on any unpaid taxes.

Gen X Finance notes the many free ways you have for getting tax advice, including calling the IRS help line at 1-800-829-1040. Believe it or not the IRS wants to help you.

And over at Wise Bread they can show you how waiting this long to file may have paid off if you take advantage of these helpful tips.

We follow many personal finance blogs for their great tips on saving money, getting out of debt, understanding your banking options, and generally improving your personal finances and happiness. We like these blogs for their steady stream of good ideas and down to earth tone. MiCash was founded to provide the unbanked and underbanked financial tools to help them meet their money management challenges.

If your blog is listed here, please feel free to right click on either of the badges above to add to your website with a link to this page: http://www.micash.net/personalfinance/micash-50-faves/

Here then, in alphabetical order are our 2010 “50 Faves.”   Blog names are hyperlinked to each site followed by the Twitter handle in Twitter’s format: @twitterhandle.

20 Something Finance @ge_miller
Focused as the name says on people in their 20s.

20s Money @kevinduffey
Another blog for the Twentysomething crowd, with advice on how to make money as a blogger.

Almost Frugal @AlmostFrugal
This group blog with the cute squirrel logo brings together the voices of four women as they talk about frugality and saving money for their families.

Bargain Babe @bargainbabe
Daily tips for savvy spenders.

Being Frugal @Lynnae
How to live frugally from a Christian wife and mother trying to get out of debt.

Blogging Away Debt
This blog switched hands after the original blogger paid off her debt.

Budgets Are Sexy @budgetsaresexy
Great advice for setting budgets and sticking to them on your way to becoming a millionaire.

Cash Money Life
Cash Money Life is a personal finance blog with an emphasis on saving money for small businesses.

Centsable Momma @centsablemomma
A frugal mom who can point you to coupons and other deals.

Consumerist @consumerist
An excellent group blog and one of the largest personal finance and consumer advice blogs by any measure.

The Coupon Queen @consumerqueen
Looking for deals and free stuff.

Dealicious Mom @dealiciousmom
This mom regularly finds you coupons and other deals

Deal Seeking Mom @dealseekingmom
You want deals? Follow this mom.

The Digerati Life @digeratilife
An engineer in the Silicon Valley blogs about personal finance and her life.

Debt Kid @debtkid
The “kid” has a great personal story of how he is paying off a personal debt and growing a business. Great tips for digging your way out of the debt hole.

DINKS Finance @dinks_finance
A multiblogger site going through a change of ownership, but still relevant.

Enemy of Debt @EnemyofDebt
Brad Chaffee shows his readers how personal responsibility and fiscal discipline relates to debt reduction.

Eliminate the Muda @leanlifecoach
Business background gets applied to helping you save money.

Fabulously Broke in the City @brokeinthecity
This 20-something gal living in the city can show you how she got out of debt and stays debt free.

Faithful Provisions @faithfulprovisions
This Christian blogger looks at saving money from the perspective of stewardship.

Finance Your Life @doctor_s
A young man’s everyday struggle with everything related to the almighty dollar.

Financial Highway @moneyhighway
Toronto based blogger with a background in finance.

Fiscal Geek @fiscalgeek
Dave Ramsey enthusiast and self professed geek.

For the Mommas @4themommas
Deals and coupons. What a value!

Free Money Finance @FMFblog
A free and simple discussion on money and finance from someone who paid off their mortgage and is living debt free.

Frugal Babe @JennFowler
Offering money saving tips and advice on how to live frugally, from a suburban “babe”’s perspective.

Frugal Upstate
Tips, Tricks and Techniques for living the good life on a budget

Gather Little By Little
A group personal finance blog from a Christian perspective.

Generation X Finance @JeremyVoh
The Gen X’ers need to budget and live frugally too. Jeremy Vohwinkle blogs here as well as writes on finance for About.com.

Get Out of Debt Guy @getoutofdebtguy
Answers questions about how to get out of debt and provides articles and videos.

Get Rich Slowly @GRSblog
Popular group blog on personal finance.

Green Panda TreeHouse @green_panda
Personal finance for college students and the young at heart

The Incidental Economist @incidentalecon
Economics, Health Policy, Law, Life: Musings of Curious Minds

Lazy Man and Money @lazymanandmoney
Irreverent and insightful look at topics such as: banking, budgeting, career, credit, debt, entrepreneurship, investing, taxes, real estate, insurance, spending, retirement, and estate planning.

Len Penzo @LenPenzo
Len Penzo does some nice roundups of personal finance blog posts from other bloggers. He also offers some nice tip, tricks, and personal advice.

Living Almost Large @livingalmost
A breath of fresh air about trying to live within your means.

Man Vs. Debt @ManVsDebt
Adam Baker’s popular blog about his life trying to pay down debt and be a dad and husband.

Mighty Bargain Hunter @mbhunter
Hunting bargains for you and me.

Money Crashers @moneycrashers
This blog seeks to develop a community of people who are trying to make financially sound decisions.

Money Ning @moneyning
Former IT pro David Ning now blogs on money.

Money Saving Mom @crystalpaine
This upbeat and encouraging blog will help you find great deals, print coupons, stretch your hard-earned dollars, and live on less than you make so you can save more and give more.

Money Under 30
SmartMoney Magazine writer David Weliver blogs about personal finance issues to help those under 30 start managing their wealth early.

Northern Cheapskate @ncheapskate
Frugal advice from the Great White North

Personal Finance Advice
This group blog offers straightforward, regular personal finance advice

Personal Finance Firewall
This newly minted college grad and IT professional is a life hacker with an interest in personal finance.

Simple Dollar @trenttsd
Another blogger with a story to tell of financial meltdown and then recovery.

Squawk Fox @squawkfox
Frugal living that is sexy and fun

Sweating the Big Stuff @DanielPacker
Budgeting advice, tax tips, and personal finance issues from the perspective of a twentysomething.

Wealth Pilgrim @nealfrankle
Offers relevant money management advice, financial stress management, and plans and resources for addiction to spending recovery.

Wise Bread
The 100-gorilla of personal finance blogs, but a good one.

A report by the Aite Group, a leading independent research and advisory firm, states that 14% of checking account users would save money by having a prepaid debit card rather than a checking account.

For years, banks in the United States have viewed unbanked and underbanked consumers as a promising segment they could address through traditional checking account relationships. Few banks have realized that new technology and financial products may actually render the checking account relationship less attractive to this customer segment. In fact, at least 14% of checking account holders would be better off switching to a prepaid debit card. (Read the article on Aite’s website).

So who are these people? Their average savings range from zero upwards of $1,900, according to Aite. Generally speaking, the less able you are to maintain a minimum balance, the more likely you are to inadvertently bounce checks and pay overdraft fees and other related fees. The more likely you are to establish an account that may not suit your needs as far as online banking, phone banking, and checking your balance through text messaging. You can manage a prepaid card account all three of these ways.