David Lazurus of the LA Times reports that Citigroup Inc. is leading the way for credit card companies to impose hefty annual fees to credit card holders. Citi issues cards that did not have annual fees will now get them, under Citigroup’s new rules. Cardholders have little recourse other than closing an account to avoid the fee, unless the charge at least $2,500 a year. Just another reason why many people are better off using a prepaid card (which is not a prepaid credit card) to make purchases and track their spending.

Lazurus finds it horribly ironic that Citigroup’s CEO announced the new fees after expressing his gratitude to taxpayers for bailing out the giant bank at the peak of the financial crisis.

How Citi expressing its gratitude for that act of taxpayer generosity?

It’s slapping a $60 annual fee on many credit cards that previously had no fees and telling customers that if they don’t like it, tough patooties. They can pay off any outstanding balance and take their business elsewhere.

Man, if that’s Citi when it’s grateful, I’d hate to see the company when it’s cheesed.

We agree.

A new study by economist Michael Flores of Bretton Woods, Inc. shows that prepaid debit cards can actually cost less to use on a monthly basis than low balance checking accounts for some consumers. Flores compared the average fees of prepaid cards against the fees charged by checking and debit accounts that charge for low balances, ATM usage, and overdrafts. He found that banks offering such accounts rack up charges of $200-$350 a year. And consumers who can’t get a checking account without a prepaid card “…must rely on a patchwork system of money orders, check cashing services and bill-payment fees” according to Payment News.

“There is no question that prepaid cards are a much better option for many consumers,” said Flores. “An objective review of the costs associated with these cards compared to costs of alternatives such as basic bank checking account, in addition to the safety and security associated of prepaid cards compared cash, leaves no doubt that prepaid cards are a smarter option for many.”

Flickr Image by TheTruthAbout...

In comparison, by our calculations, MiCash cardholders save as much as $322 annually compared to people who use check cashing services instead of direct deposit to our Prepaid MasterCard. And compared to our competitors, we offer some of the lowest fees around, as well as friendly 24/7 phone customer service.

Financial blogger Alain Sherter at Bnet.com offers a biting commentary on Senate lawmaker’s decision to reject President Obama’s proposal to set up a separate agency to regulate non-banking institutions that provide such things as mortgages, payday loans, and other financial products.

Banks win, consumers lose. I wish I could cushion the blow, but scuttling the formation of an independent agency to protect people against unfair and deceptive financial products (pay-option ARMS, anyone?) counts as a major victory for the industry — and a bitter defeat for just about everyone else.

Many commentators see this as a win for banks and other lenders, and a loss for consumers. While the Senate continues to work on alternatives, it looks like the status quo will be protected.

It is okay to splurge every once in a while. After all, life would not be very enjoyable if we could not let ourselves loose every once in a while. We also need some form of reward for all the hard work we have been throwing ourselves into. We have pointed out some time before that splurging is very different from overspending. If you find yourself compulsively shopping more often, buying something not because there is a need but simply for the sake of buying it, than you had better watch out especially if you use a credit card as your main payment option. Excessive overspending can lead to credit debt. And as we always say, credit debt is a nasty trap we do not want to get ourselves pulled into.

For some people, the threat of debt alone cannot curb the appetite for spending too much. Here are a few simple tips that can help you ease out from the clutches of the bad habit of overspending.

Monitor Your Spending Activities

Know how much is in your wallet and your bank account. Keep the receipts from past purchases. You might even want to list down your daily expenses on a notebook or a file on your computer. You do not have to be an accounting whiz to keep track of your spending activities. You just need to observe how you use your money. Find out how much you tend to spend per day on the average, and see if your consumer lifestyle is in sync with your income.

Downsize and Downplay

Where does your money usually go to? How often do you refuel your car? Do you eat out a lot? Do you shop for a new pair of shoes almost every weekend? Sometimes, it is best to downsize on the expenses that we need for daily life, and downplay our expenses for things we can do without most of the time. Shopping for clothes and shoes may be fun but unless you are a trendsetting fashion icon who is photographed everyday for her new looks, you do not need to do it every weekend. Put a budget on your food and grocery expenses as well.

Get a Prepaid Debit Card

Keep your credit card for emergency purchases. As much as possible, use cash instead. If the payment requires the use of a card or you have simply gotten too used to plastic payment, get a prepaid debit card. Unlike credit cards, which tend to accumulate interest and whose expenses are hard to monitor frequently, prepaid debit cards act more like an extension of one’s wallet. You can only spend up to the amount you yourself put into your account. You will be able to keep a closer eye on your expenses. As a plastic payment option, it carries the same perks and privileges of using a credit card; you can shop online with it, make travel reservations remotely, and do other activities that can otherwise not be penetrated by cash payment.

The Credit Card Act of 2009 introduced major changes to the credit card industry. These changes are meant to benefit consumers and set conditions for what credit card companies can and cannot do.

One big change that went into effect on February 22, 2010 was new stricter rules for consumers under the age of 21. Under the new law, if you are not yet 21, you either have to show that you are able to make payments or you will need a cosigner in order to open a credit card account. Some parents may be reluctant to cosign on a teen credit card account and take on responsibility for any debt acquired on account.  Also, cosigners must agree in writing to any increase in the credit limit of the young cardholder.

Credit card companies have long targeted college students for credit cards with on campus applications and few barriers for acceptance. As a result, many students racked up substantial credit card debt by graduation or before their first job.

Prepaid debit cards are an attractive alternative to credit cards for students seeking the buying power, safety, and convenience of plastic, because most merchants including online merchants accept them. A Prepaid MasterCard or Prepaid Visa give students an option that does not involve credit checks, cosigners, or finance charges.

Photo by World Economic Forum

Speaking at a recent event on the prepaid card industry, Former U.S. President Bill Clinton said prepaid cards were “an example of the technology available that can help solve some of the nation’s thorniest problems.”

He went on to list several ways prepaid cards can help address the nation’s problems of economic inequality, financial instability, and reduced sustainability.

Photo by kirstiecat

It’s only the start of spring, and already people are looking at matters meant for the fall. That’s when a new semester of college starts anew, and when people start thinking about how they’re going to pay for it. An estimated 70% of all students in the United States are able to study in college thanks to various grants, student loans and scholarships. These people end up becoming the future workforce of the nation, and some rise to become captains of industry.

Yet, the future is not always bright for these students. The average cost of a college education for public colleges is about $4,081 annually. For students who enroll in private schools, the figure is steeper: $18,273 a year is what students need to pay.

Pick Your Schools Early

Where do you live? If your heart is dead-set on a school outside your home state, try to go for it. Bear in mind, however, that for a lot of state colleges, you will need to pay more if you are enrolling from a different state. This is because the financing that goes into it is taken from state taxes, and prices will vary if the student isn’t from the state (and therefore, whose taxes didn’t go towards the college).

Plan ahead. This is not to discourage you from pursuing a program or a degree in the best possible place you can earn it. Just bear in mind what kind of debt you may need to shoulder, and if your degree and (future) career can possibly pay it off.

Like All Loans, Study The Terms

The system of college loans was supposed to be designed to feature lower interest rates for students and easier repayment terms when compared to loans that are offered at market rates and terms. These rules were intended to make it easier for students to finish their college degrees.

However, too many people still have trouble repaying their college loans. In his book The Audacity of Hope, President Barack Obama narrated how difficult it was for him to pay off the college loans he incurred, largely because of the expensive costs of his university.

Like all loans, study the terms. Interest rates, schedules of payments, creditor policies and terms of payments all come into play, as they all can be very different for each student.

Volunteer!

People who are looking for ideas for wiping out educational loans can always take an alternative route to paying them off. These activities involve rendering service to the country, and in return the government can provide loan forgiveness, and help write off these debts right away.

Programs such as the Peace Corps, Americorps and other volunteer programs can help deal with student debt under certain circumstances. Some professions to consider that help deal with debt include becoming a full-time teacher in high-need areas or enlisting in the armed forces, especially those stationed in high-risk areas.

Staying Smart

At the end of the day, understand that it’s your job to make sure you have good training and education, both keys to a bright future. Because you learn best when the money isn’t something that’s on your mind, we hope these tips become truly helpful.