Can you imagine getting paid each day that you work? That’s the idea behind Instant Financial’s app, which puts cash in the hands of workers on the same day they work. This program attempts to reduce absenteeism and employee turnover for restaurant chains.
At the end of each workday, employees may take 50 per cent of their pay for that day and transfer it to an instant account; the other half is paid at the end of the regular pay period. Funds in the Instant account may be accessed with a debit card or transferred to a bank account.
The app can reduce the use of payday loans, with exorbitant borrowing rates, as workers have access to funds between pay periods. Instant Financial makes money from fees charged employers and merchants when debit cards are used; although employees may pay ATM fees.
A major concern of the app is that it might discourage long-term financial planning. Poor budgeting habits could result in increased use of debt due to a lack of funds at the end of the month. Employees who use the app are encouraged to practice wise money management, including creating and building an emergency fund and other savings.
Most financial institutions offer overdraft programs for checking accounts, which for a fee covers a transaction where there is not enough in the account. However, this service can result in several fees before the next deposit is made. For debit cards, an overdraft fee cannot be charged unless you have agreed (“opted in”) to these fees.
To reduce or eliminate overdraft fees, these actions are suggested:
carefully track your balance; sign up for low-balance alerts
check your balance when making a debit card purchase; also consider other checks that may not yet cleared
do not opt-in to an overdraft program for your debit card, or opt-out if you are currently opted in; while your debit/ATM may be declined, you will avoid high fees
link your checking account to a savings account to cover overdrafts
contact your financial institution to determine if you are eligible for a line of credit or a linked credit card to cover overdrafts
compare account fees at other financial institutions
Payday lenders see borrowers as prey, people floundering in financial difficulty.
The Consumer Financial Protection Bureau is planning to release proposed rules related to loans and other short-term borrowing, such as auto title loans. These efforts will include requirements that payday lenders make sure borrowers are able to repay the loans.
Payday loans are usually viewed as a temporary financial solution. However, quite often borrowers need more time. As a result, consumers get trapped in rolling over their debt and may be charged as high as 700 percent on an annual basis. According to the Pew Charitable Trusts, 12 million Americans use payday loans each year, resulting in $7 billion of interest and fees.
For additional information on payday loans, click here.
Have students ask people to describe situations in which a person might use a payday loan.
Have students create a list of methods that might be used to inform others of alternatives to payday loans.
What are benefits and drawbacks of payback loans?
What alternatives might be considered instead of a payday loan?
While beneficiary, collateral, and fair market value are familiar to many, these terms can be especially confusing to those with limited English-language skills. In an attempt to assist various people, the Consumer Financial Protection Bureau has created the Newcomer’s Guides to Managing Money to provide recent immigrants with information about basic money decisions. These guides offer brief suggestions to those who are new to the U.S. banking system. The guides also include guidance for submitting and resolving problems with a financial product or service.
The Newcomer Guides include these topics:
Ways to receive your money, comparing cash, check, direct deposit, and debit cards.
Checklist for opening an account, to assist with starting a bank or credit union account.
Ways to pay your bills, providing guidance on whether to pay by check, debit card, credit card, or online.
Selecting financial products and services, providing assistance on deciding which financial services are right for various household situations.
Print copies of the guides can be ordered or downloaded. These publications are available to English and Spanish with additional languages to be offered in the future.
For additional information on money guides for newcomers:
Scammers are taking advantage of millions of consumers who haven’t yet received a chip card. For example, scammers are e-mailing people, posing as their card issuer. The scammers claim that in order to issue a new chip card, they need to update your account by confirming some personal information or clicking on a link to continue the process. Information received can be used to commit identify theft. If they click on the link, they may unknowingly install malware on your device.
How can you tell if the e-mail is from a scammer?
There is no reason your card issuer needs to contact you by e-mail or by phone to confirm personal information before sending you a new chip card number.
Still not sure if the e-mail is a scam? Contact your card issuers at phone numbers on your cards.
Don’t trust links in e-mails. Only provide personal information through a company’s website if you typed in the web address yourself and you see that the site is secure, like a URL that begins https (the “s” stands for secure).
While smartphone apps have made banking easier than ever, threats to financial security continue to grow. However, some simple actions can be taken to avoid banking app mistakes.
1. Don’t conduct banking transactions on public Wi-Fi networks since they are vulnerable to hackers. Use a virtual private network (VPN), which provides added security and encryption.
2. Log out after your session to prevent a thief from getting access to your bank account.
3. Select a not-so-obvious username. Create password recovery questions with responses that are difficult to obtain from public records.
4. Update your app when a new version is available to take advantage new security features.
5. Create a strong password with special characters, and it should be at least 12 characters long. Change your password every 90 days.
For additional information on banking app errors, click here.
Have students talk with others about their experiences using banking apps.
Have students locate online information about the latest security features fof banking apps.
What are benefits of costs of banking apps?
How might banking apps be improved for increased financial security?
Each year, America Saves (www.americasaves.org) conducts a survey or its program participants to determine the attitudes and behaviors of savers. The most recent study reports that:
People save mainly for their emergency fund, retirement, or repaying debt.
People in formal savings programs, such as America Saves, report saving larger amounts.
Married respondents saved much more than single respondents.
Females and males have different saving purposes; females favored saving for an emergency fund, males favored retirement saving.
Savers involved in America Saves are saving more, are more confident in their ability to manage their money, and are managing their debt better while feeling more optimistic about their financial situation.
The complete Savers Survey report is available here.
Have students talk to others about their savings habits and goals.
Have students prepare a graph to monitor their savings activities.
What actions can help encourage a person to have more effective savings habits?
Why does being involved in an organized savings program result in more savings and better money management activities?
How can you verify whether or not a debt collector is legitimate? Below are a few warning signs that signal a debt collection scam:
The debt collector threatens you. Legitimate debt collectors probably won’t claim that they will have you arrested or claim that they or their employee are law enforcement officers.
The debt collector refuses to give you information about your debt or trying to collect a debt you do not recognize.
The debt collector refuses to give a mailing address or phone number.
The debt collector asks you for sensitive personal financial information.
Tell the caller that you refuse to discuss any debt until you get a written “validation notice.” This notice must include the amount of the debt, the name of the creditor, and a description of certain rights under the federal Fair Debt Collection Practices Act.
For additional information and to learn more on debt collection practices, click here.
Ask students to draft a sample complaint letter explaining that the debt is not legitimate and demanding the debt collector stop contacting you.
Ask students to compile a list of governmental and nongovernmental agencies where consumers can send debt collection complaints.
Do all states require debt collectors to be licensed?
If the debt collector is licensed in your state and he/she is not acting properly, what are your remedies?
Who enforces the Fair Debt Collection Practices Act and how this law protects consumers?
Millions of consumers use prepaid cards for spending, saving, and managing their money. Card issuers offer diverse products to meet the needs of users and prepaid cards vary immensely across the industry. Such diversity is beneficial to consumers, provided that the overall quality of products is high and that providers continually strive to meet the needs of consumers.
At the same time, it is important at this point in the industry’s development to take stock of the quality of products in the marketplace and to encourage prepaid card issuers to pursue policies that actively improve consumers’ financial lives. Drawing upon the framework of CFSI’s Compass Principles and the definitions of quality articulated in the Compass Guide to Prepaid, this report assesses the level of quality in the current prepaid card marketplace and provides a set of benchmarks against which future progress can be measured.
Eighteen General Purpose Reloadable (GPR) cards are analyzed in this report. These cards collectively represent approximately 90% of the total GPR card marketplace and include the largest players in the industry, as well as a sampling of smaller programs with particularly innovative cards. To develop scores for the industry as a whole, these eighteen cards were assessed against the recommendations outlined in the Compass Guide to Prepaid. Quantitative and qualitative methods of analysis were employed to generate scores that accurately capture the quality of products in the prepaid card marketplace.
For additional information on the Prepaid Card Industry Scorecard, click here:
Have students research various fees associated with prepaid debit cards.
Have students create a short video that communicates actions to avoid fees for prepaid debit cards.
What are the main differences between traditional and prepaid debit cards?
Explain situations when people might use a prepaid debit card.
Are there certain age demographics that would use prepaid debit cards more?