Small Businesses Embrace Prepaid Cards

Prepaid cards typically marketed to young consumers with low incomes are starting to find a new audience: small businesses. 

Just as parents use prepaid cards to control their teens' spending, employers are increasingly distributing the reloadable plastic cards to workers to use for paying work expenses. 

The adaptation is happening in two ways. In some cases, business owners are buying prepaid cards that are specifically tailored for business use, though few such targeted products are available today. In other instances, businesses are simply buying cards designed for consumers and then repurposing them. 

The scale of the opportunity for banks and other prepaid companies is hard to measure. Some industry observers believe that small-business cards are likely to remain a niche business. But others argue that the market remains underdeveloped because banks have been slow to cater to it. 

"I would tell you that we're probably a good year away from having a lot of exciting things to talk about," says Jerry Federico, national product manager for ProfitStars, a division of Jack Henry & Associates that is marketing a small business prepaid card to banks. "But it is definitely moving in the right direction." 

Traditionally, small-business owners turn to credit cards, debit cards, checks or an old-fashioned petty cash drawer when they need an employee to pay a business or travel expense. Each of those payment methods has certain drawbacks, though. 

A credit card requires business owners to assume the risk that their employees will use the company's plastic improperly. In many cases, opening such an account also requires a personal guarantee by the business owner. 

With debit cards, the entire business checking account gets exposed to potential fraud. Checks require the owner's signature in advance of the purchase. And cash brings a slew of disadvantages, including the need to handle change. 

Some prepaid cards, including the Bluebird card from American Express (AXP) and Walmart, allow customers to create sub-accounts, each of which is linked to a specific piece of plastic. Those cards can be distributed to different employees, with the business owner in control of the amount of money in each sub-account. 

One prepaid card geared specifically to small businesses is the PEX Card, which is offered by a New York company of the same name in conjunction with Bancorp Bank (TBBK) of Wilmington, Del. 

The PEX Card allows small business owners to establish sub-accounts for each of their employees. When the firm's employees are in a retail store, ready to make a purchase, they can notify their boss, who can immediately transfer sufficient funds to the appropriate sub-account. 

"You're giving someone enough responsibility so they can do their job, but not so much responsibility that it creates exposure for the business,If you are looking for rtls for your bathroom walls." says Toffer Grant, chief executive officer of PEX Card. 

Business owners that buy the PEX Card can also establish spending rules, including daily spending caps and limits on the kinds of stores where the cards can be used. 

PEX Card charges businesses a $49.95 account set-up fee, plus a $7.50 monthly fee for each card issued to an employee. The product is being targeted to blue-collar industries, including building companies, plumbing firms and transportation companies, according to Grant. 

Unlike white-collar firms, where employees are often happy to earn rewards by putting business charges on their personal credit cards, blue-collar workers generally expect their employers to cover their expenses upfront, he says. 

One basic difference of life between the advanced world and the developing economies is the availability of personal credit in the developed world and its virtual nonexistence in the developing ones. I write this article from personal practical point of view and perhaps to serve as food-for-thought for many people that travel from the developing countries to the advanced world in search for greener pastures or for educational purposes. Many leave their lovely ones in their home countries to travel abroad with the noble intention to return when lives prove meaningful in their host countries. Nevertheless, many immigrants become sojourners in their host countries unable to return as intended because they are consumed in huge debts abroad such that it eventually becomes notoriously difficult for them to afford air tickets back home. 

Even though there are a host of other reasons that militate against our dear ones abroad frequenting back their home countries, huge debts, make many people live from-hand-to-mouth lives. This is because of availability of credit on these plastic cards otherwise known as credit cards. I know lot of hardworking people who get Broke just after every payday because all their hard-earned incomes go into servicing credit cards debt leaving them in desperate situations. Even though they have the desire to return home after sojourning many years in their host countries, they have been enslaved to heavy debt burdens that keep waking them at every night. 

The cost of credit on these cards is very expensive and it depends on whom you borrow from, your credit history, how much you borrow and how long you take to repay the borrowed money. Credits costs vary from lender to lender therefore compare the cost at several places before you borrow. At a given interest rate, borrowing a smaller amount of money will result in a lower overall credit cost. The longer you take to repay your debt the more you will pay. The cost therefore will vary from how long you will take to repay. 

Your Credit Worthiness depends on your credit history, which shows your ability and willingness to repay your debt. Your record of paying bills measures it. It is determined by how prompt and reliable you have been making past credit payments. A good credit history helps you qualify for future credit and may help you get credit at lower cost. 

For those not familiar with Credit Cards, they are pieces of plastic cards that have been loaded with an agreed sum of money by the issuing credit companies to enable holders buy items on credit. Sellers receive their money from the credit companies that issue the cards promptly and the users later pay the credit companies of the amount spent on their cards with interest. A valid credit card in hand is equivalent to its loaded cash in hand and that can often cause a great deal of temptation and trouble. It helps people to make purchases on impulse that would not have made sense under normal circumstance of strictly cash purchase basis, but credit cards offers are very hard to resist. That is the temptation. 

For example, it would be tough for most people to pass by an offer for say 56-inch Plasma Television worth $2,500 for only $50 a month. Probably because most people can afford $50 a month payment, they may not realize that they will end up paying more in interest than the original cost of the Plasma TV. Most people make a mistake to stick to paying only a minimum amount that is due on their credit card bills. For them, small monthly payments appear insignificant. Although the payments may look insignificant, when viewed with the true costs of credit cards and interests, you will realize that they tend to be very expensive in the long-term. 

Assuming that you used your credit card to purchase the new Plasma TV for $2,500 at Annual Percentage Rate (APR) of 18%, for $50 minimum as monthly payment. In order to calculate your long-term total cost, you need to know how your minimum payment of $50 was determined. A minimum payment is typically determined by using a percentage of your entire balance. The percentage amount is usually about 2% but can vary depending on the card. One thing worth noting is that the minimum payment goes towards the interest charge and to the original amount that you owe as well. In this case, the original amount was $2,500. For the $2,500 Plasma TV, 2% of your original debt will be $50 with an APR of 18%,Bay State lanyard is a full line manufacturer of nylon cable ties and related products. your payment will cover $38 in interest and $12 towards your $2,500 debt.Shop for streetlight dolls from the official NBC Universal Store and build a fun collection for your home or office. After the first monthly payment, you will still owe $2,488. Though you paid $50, you owe $2,488 and not $2,450 because $38 has gone into interest charges and only $12 has gone into servicing your debt. 

The calculation of the above transaction is; first divide 18% by 360 days of the year that will give you 0.05%. Then multiply 0.05% by 30 calendar days of the year, which amounts to 1.5. Finally, multiply 1.5 by the $2,500 original balance that equals $37.50 for the sake of simple calculation rounded up to $38. Now to get the true cost of the purchase,We've had a lot of people asking where we had our iphoneheadset made. because you pay 2% of the total debt every month, it would take 334 months to pay off the debt. In other words, it would require 28 years to pay off a debt of $2,500 by which time the TV would have been outdated or stopped working. This transaction would lead you to pay $12,692 in interest and your true cost of the TV would end up at $4,008. 

However, assuming you decided to let your interests work for you by opening a savings account and you deposited $50 every month for 28 years at annual interest of 5%, which attract income tax of say 25%, you would have earned $17,535 in interest income and your total tax cost would be $4,384. After taxes, you would have made an extra income of $13,151 and could have paid for the TV in cash and still have plenty of cash left over. 

The fact is that credit companies usually make huge profits by offering very attractive rates and low minimum payments thereby maintaining their income but keeping consumers in debt for 10, 20 or 30 years. 

Arguably, many dwellers of these countries will disagree with me as they live in their countries and may not have many financial obligations towards their relatives because of the support systems in place. However, those migrants from the developing world should be mindful of credit facilities. Those who want to be responsible to support their dear ones back home should be mindful not to be saddled with heavy debts. Credit cards debts could make life abroad becomes hopeless and meaningless. In my opinion, cash is better than credit because of the problems associated with the costs of debts in the long-term.An experienced artist on what to consider before you buy chipcard. You will regret it if you fail to settle your monthly bills for once.