Prepaid, loadable cards, unlike credit cards, are not covered by federal laws that protect cardholders from fraud or limit losses when a card has been lost or stolen. Some companies volunarily provide the services but are not under any obligation to do so. They are, however, covered by zero liability and other protections against fraud, if the card is part of the Visa or MasterCard systems. Without the ability to reject unauthorized charges, cardholders are less willing to pay bills or make purchases online with a prepaid credit card.

For consumers without Internet access or who don’t speak English, monitoring account activity can be difficult, as prepaid cards generally don’t send out statements by mail, according to a Consumers Union statement submitted to the Fed’s advisory council. “How can you know if you’ve been a victim of identity theft if you’re not seeing what’s going onto your card?” asked Lauren Saunders, managing attorney at the National Consumer Law Center.

One of the major complaints from merchants is that they haven’t been able to negotiate the fee structure with banks in the Visa and MasterCard network, who control nearly three-quarters of the volume of general purpose credit transactions. (American Express Co and Discover Financial Services have their own systems.) The current system has been called anti-competitive and critics claim the fees are passed on to consumers. Interchange rates range from 1.6% to over 2% with approximately $48 billion collected last year, averaging 1.75% of total purchases.

With profits squeezed by the recently passed credit report bill, banks were relieved to see the interchange fee structure left intact. But this new bill would be another setback for banks looking for ways to restore profits and shore up their balance sheets. “Any time you cut out interchange fees, it’s really detrimental to credit unions because we have smaller economies of scale, unlike the larger issuers,” said Eddie Ambrose, Associate Director of Legislative Affairs for the National Association of Federal Credit Unions. “It’ll adversely affect us more.”

The bill is a reworking of previous attempts to pass legislation. Merchants and retailers would be given greater access to negotiations to establish rates and terms with banks. An antitrust attorney from the Department of Justice would be present at the discussions. However, the provision in last year’s bill that would require merchants to pass along the savings to consumers was not included.

The Electronic Payments Coalition, representing payment card networks and financial service companies, opposes the bill and criticizes the motivation of merchants. “This legislation is an attempt by giant retailers to make consumers pay for one of their business expenses — the cost of accepting credit and debit,” the group said in a statement.

Capital One Financial Corporation recently conducted a survey that measured Americans’ Financial IQ. Fewer respondents said they understand financial fundamentals compared to previous years and most admitted they’re not putting enough into savings. The survey shows a 5% decline in consumers who felt highly knowledgable about personal finance, from 64% in 2007 to 59% in 2009.

In today’s struggling economy, for example, a majority of credit cardholders do not understand the changes that lenders are making to their accounts that could result in a lifetime struggle with debt. As economist and Yale professor Robert J. Shiller recently wrote in The Wall Street Journal, “This nation needs to consider how it can help the great mass of investors better handle financial affairs — not only their homes, but credit, loans, medical, and retirement planning.”

The foundation to financial success is to become knowledgable about all of the technical terms and confusing language and concepts and then putting them into action. Mastering economic and financial issues takes time and has no value, if it’s not put to good use. Seminars or talks organized by community services or financial organizations, books and periodicals, business magazines like Forbes and Business Week, the business pages of newspapers are all ways you can pursue financial literacy. But perhaps the easiest way is to talk with your business colleagues, friends and family - someone who is successful, respected and has experience with financial matters.

Benjamin Olson, an attorney for the Federal Reserve, and two other agency representatives recently answered questions about the new rules at an implementation session between regulators from the Office of Thrift Supervision and the Federal Reserve, the National Credit Union Administration and other lending institutions. The briefing was designed to encourage card issuers who haven’t yet made plans to implement the new rules to begin to do so.

Another issue that hasn’t yet been addressed regarding the new credit card regulations concerns returning military personnel. It is uncertain how the new regulations will affect them when they return home from active service duty. Under the Service Members’ Civil Relief Act, interest rates must be lowered to 6% for military personnel who are deployed for active duty. When they return from duty, interest rates are increased to previous levels. But the new rules limiting interest rate increases to only specific circumstances does not include military personnel returning from duty. Now that the issue has been recognized, Olson said that a solution will have to be found to fix it.

Be sure to see all the best credit card deals >

• Begin by checking your credit report for accuracy. Request a free copy at www.annualcreditreport.com. Be sure all account information is correct and review all areas for errors. Immediately report any discrepancies to the proper credit bureau. Keep on them until the issue is resolved.
• Pay all your bills on time. Even one late payment will reflect poorly on your credit report and affect the rates you will pay on future loans and credit accounts. Collection actions and defaults will remain on your credit report for up to 10 years.
• Maintain low credit card balances to keep the ratio of credit card debt to available credit low. The more funds you have available to borrow the better your credit score will be.
• Apply for additional credit only if absolutely necessary and after you have fully researched the company to be sure you qualify. Excessive inquiries for additional credit reflect poorly on your credit report.
• Consistent use of credit gives lenders a clear picture of your ability to handle credit responsibly. Many consumers trying to get their debt under control make the mistake of ending credit spending entirely. For credit report purposes, use your card at least once every 6 months.
• Keep old lines of credit open. Long-standing accounts have a positive impact on a credit score. Consider using it once every 6 months to show activity.
• Take advantage of the 100 word personal statement that can be included in your credit report. A well crafted statement about your unique circumstances or credit worthiness could positively influence a lender. But keep in mind that lenders could still bypass this statement and only consider your score.

* See a complete list of all the best credit card deals >

Looking at thousands of consumers who had taken out mortgages in 2002 and 2005, the study tracked their payment behavior over a 24-month period. Of those in the 2002 sample who had missed two mortgage payments during the 24-month period, 26% kept up with their credit card payments; 59% made all of their car payments. Moving ahead to 2005, mortgage payments slid down the list of priorities even more. Of those who fell behind on their mortgages, 38% maintainted a spotless credit card payment history and 62% kept up their car payments. Although the mortgage payment should be the first priority, many borrowers may be neglecting it because they think the government will help them keep their homes. The trend was more pronounced in states like Florida and Arizonia, where many people made speculative home investments.

How’s your credit? Be sure to get a copy of your credit report >

This new potential harvest of credit card users are ripe for the picking for scam artists and less than reputable credit card issuers. Parents who are considering a credit card for their son or daughter need to consider:

• Your own credit solvency and credit history will determine whether you will be approved for a card for your child. Never apply for any type of credit, if you’re already at your maximum repayment level or your credit score isn’t in the excellent range.
• Your child’s level of responsibility should be seriously examined before you commit to a credit card agreement. A child with low impulse control may cause serious long-term debt problems. Capping their ability to spend with a secured credit card or a prepaid debit card may be the way to go with a child with limited control. The card can only be used as long as there is money on deposit in an account set up specifically for this purpose.

After examining the reasons why your child should have a credit card and deciding it’s a good idea, you’ll need to evaluate the offers carefully. The fees and interest rates that typically apply to offers for students and youth can be surprisingly steep.

1. Annual Fees - With the multiptude of offers, there is no reason to accept an offer with an annual fee. This is just another way for issuers to get more of your hard earned money. Look for “No Annual Fee” offers only.
2. Disciplinary Fees - Late fees, default fees, over-the-limit fees, cash advance fees, balance transfer fees are triggered by various actions. Make sure your child understands which options are off-limits like balance transfers, cash advances or convenience checks. Also, explain the damage to credit ratings and wallets when a payment is missed or late or when the card is used beyond the allowed credit limit.
3. Introductory APR Offers - This is one way that credit card companies entice you to accept their offer. Be sure the standard APR, which kicks in after the introductory period, is reasonable. Check the monthly statement for rate hikes or fees, as card issuers can raise them at any time.
4. Reward Programs - A nice perk but definitely NOT a reason to use credit. The reward is a token when you factor in the potential cost of carrying a balance from month to month. Make sure your child understands that the reward is not an excuse to max out the card.

Teach your kid how to beat the credit card companies at their own game by paying off the balance in full and on time each month.

“Lack of consumer knowledge about credit scores not only increases the costs of their credit and insurance but also reduces the availability of these and other services,” said CFA Executive Director Stephen Brobeck. “By taking a few simple steps, American consumers have the power to reduce their  credit costs by billions of dollars annually,” says Washington Mutual Card Services President Anthony Vuoto. Using data provided by Argus Information and Advisory Services, WaMu estimates that U.S. consumers could annually trim credit card finance charges by $105 by raising their credit score by 30 points.

“This lack of knowledge hurts consumers because credit scores strongly influence the availability and cost of not only mortgage, auto and revolving credit, but also other services such as utilities and insurance,” said Stephen Brobeck, executive director of the CFA (Consumer Federation of American).

Consumers with credit scores below 600 are almost always charged relatively high “subprime” loan rates, while those with scores above 700 are often charged relatively low “prime” rates, while those with scores above 760 are generally charged the lowest rates. With higher credit scores meaning lower interest rates, the estimated collective annual consumer savings would be approximately $28 billion, if every consumer raised their score by 30 points.

The survey revealed numerous gaps in consumers’ awareness of credit scores with 59% of respondants not understanding that maxing out their credit card will lower their score. While 78% of those surveyed understood that making a payment more than 30 days late will negatively effect their score. “Many Americans fail to understand that one’s credit score reflects only how they use credit, not factors such as income and age,” the press release says.

Learning what effects your credit score and applying that knowledge can have a significant impact. Here are some of the basics:

• Consistently pay your bills on time
• Never use more than 50% of your credit limit on a credit card
• Don’t open multiple or unnecessary accounts
• Regularly review your credit reports for errors

The profit margin on gasoline sales are now being eaten away by credit / debit card fees with many consumers now using credit for all their gasoline purchases. In fact, Calhoun said that Howdy’s is now losing money at its stores on fuel sales. “Transmountain paid $255,000 in credit and debit card fees in the first three months of this year, up 30% from the same period a year ago,” Calhoun said. “That’s tied to a 20 - 25% increase in credit card usage,” he said.

Ross Garrett, who owns a Chevron-branded gas station, said credit card fees are having a “devastating” effect on his business with credit cards fees reaching $65,000 so far this year. “For every $1 cash sale, I bring in $2 in credit sale. By the time I end up paying all the credit-card fees, I don’t have much left,” Garrett said. With inside sales not making up for the loss, his store is losing money.

Convenient stores, selling approximately 80% of the country’s gas, paid more than $1 billion in additional credit card fees since 2006 and have also seen profits drop by $1.4 billion in that same time period. Lenard, a spokesman for the National Association of Convenience Stores in the Washington, D.C., area, said, “The whole issue of rising credit-card fees” tied to increasing use of plastic for fuel purchases “is the biggest issue facing fuel retailers in years.” Credit-card fees average about 2.5% of the dollar amount of each purchase, Lenard said.

A growing number of stores are considering cash discounts but are concerned that customers may feel punished for using plastic. Many consumers would also require a discount of $.10 to make the switch from credit to cash.

Lower the cost of gasoline! See our gas reward credit cards.

Many of the better gas reward credit cards require you to purchase your gas from specific, eligible gas stations to earn the largest cash rebate. These are typically defined as stand-alone gas stations and not gas pumps at discount stores or warehouse clubs. Many of these cards allow you to earn a flat percentage of 1% on all other purchases as well.

When applying for a gas reward credit card, it is important that you read and understand all of the terms and conditions of the offer. Be on the lookout for offers that look too good to be true. For example, some offers with significant savings are actually ‘teaser’ offers that will expire after a short period of time. Others have a limitation on the amount of cash you can earn or require significant card usage before the higher rebate kicks in.

Examples of Possible Savings!

• According to AAA, a trip from Richmond, VA to Disney World in Orlando, FL would be a round trip of 1,478 miles. At an average of 20 MPG, the cost of gas at $4 per gallon would be $296 or 74 gallons. The cash rebate even at the lowest end at 1% would be $2.96, but at 5% the rebate would be $14.80.
• A weekly 20-gallon fill-up at $4 per gallon with a 1% rebate gas card would earn $.80 per week, which seems insignificant, but that would equate to $41.60 over the course of a year. At 5%, the savings would be $208 a year.

If you live in a multiple vehicle household, the savings will be substantially more. But keep in mind, using a gas reward card only makes sense if you pay the balance in full each month. The interest you pay to carry a balance month-to-month will easily eliminate any benefit that you can earn.