Bad Credit? Consider the Convenience of Prepaid Credit Cards

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Prepaid credit cards are a fantastic option if you need the convenience of a traditional credit card but have poor credit scores that would hinder your ability to be approved for one. Prepaid credit cards are "secured" meaning that they are collateralized by a sum of money which then becomes the credit line for that particular card. These reloadable cards work much like debit cards in the sense that you can only spend as much as the card is "loaded" with, but does not require a bank account to which a typical debit card is linked. There are a number of reasons why prepaid credit cards benefit anyone and everyone who uses the.

Because you can only spend the amount that you have put onto the card, you can avoid falling into debt and receiving bad credit marks. Also, since you are not "borrowing" money from a source like a credit company, you will never incur financing fees, late charges, or over-the-limit fees that are all associated with traditional credit cards. There will never be a monthly bill that will cause you stress if you do not have enough money left over on your check to cover even the minimum balance due. You will only ever be able to spend as much as you preload the card with making it easy to maintain and a stress-free way to manage your money.

Prepaid credit cards are also great alternatives for people who prefer not to deal with banks. As mentioned before, these types of cards do not have to be linked to a bank account. This is especially great for people who are not able to open a bank account due to bad credit scores or past negative accounts with other banks. Many cards even come with accounting and routing numbers which allow you to set up direct deposit for your paychecks alleviating the need to pay high fees at check cashing companies just to get access to your hard-earned money.

Many prepaid credit cards come with a bunch of cool features. Other than the basic ability to make payments with a card at a store or online, you may also be able to withdraw cash from an ATM, make a one-time bill payment online, or even set up monthly recurring payments for your bills. Not only are they convenient payment options, but they are extremely easy to reload. If you need to put more money on your card you can transfer money from a bank account or financial institution, set up your paychecks for direct deposit, transfer money from a PayPal account, or reload it in a retail store like Walmart or Walgreens.

For many people, this type of payment option is the easiest and safest way to go about their everyday daily activities with peace of mind that they won't go into debt or hurt their credit score as they could with a traditional credit card.

Prepaid Credit Cards are great options for people who have poor credit, don't enjoy dealing with banks, or just want a secure way to handle transactions at stores on online. Do your research and find one that will perfectly suit your needs and uses.

The Five Things Retailers Should Know About Gift Cards

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AppId is over the quota

Nexus: Gift cards (other than electronic cards), are tangible representations of intangible property, but they are property none the less. Therefore, they have the potential to create economic nexus in a state where the issuing retailer does not have a physical presence. Therefore retailers who distribute gift cards through third parties could potentially be subject to multi-state income taxes.

State Escheat Laws: From time to time companies are left holding a liability for unclaimed or abandoned property held on behalf of the owner. Property is considered abandoned after a period of dormancy. The dormancy period as defined by states; escheat laws varies from state to state. Under the escheat laws the holders of abandoned property are required to remit the property to the applicable state which then holds the property in custody for the owners The dormancy period as defined by states; escheat laws varies from state to state. Under the escheat laws the holders of abandoned property are required to remit the property to the applicable state which then holds the property in custody for the owners. Approximately 10% to 19% of gift cards issued remains unredeemed, and may become subject to escheatment. Many states have increased their pursuit of abandoned property in efforts to increase revenues.

CARD ACT of 2009: The Credit Card Accountability, Responsibility and Disclosure Act of 2009, (CARD Act) took effect in early 2010. The CARD Act prohibits issuers from charging fees on cards for 12 months and extends gift card expiration date to five years after purchase. In addition to the CARD Act, gift cards are also subject to state statutes. Issuing retailers must become familiar with all applicable laws.

Accounting for Breakage Revenue: Retailers sell gift cards with an expectation of breakage revenue, (assuming that the state's escheat rules do not apply). Breakage revenue is unmatched by cost of sales and can therefore, have a significant impact on the company's financial statements. Although generally accepted accounting principles ("GAAP"), does not allow businesses to derecognize liabilities until the liability has been relieved, there is a special exception dealing with gift cards. GAAP allows companies to recognize breakage revenue when the chance redemption is remote, and it is possible to estimate the amount that will not be redeemed. However, GAAP does not prescribe and specific financial statement disclosures, how and when breakage revenue should recognized, or where breakage revenue should be recognized on the income statements. Fortunately the securities exchange commission, which is also an accounting standards setting body provides some guidance. Even so there is a lot of diversity among retailers on financial statement presentation of breakage revenue.

Federal Income Tax Deferral Period: Many retailers established separate gift card management companies in states with favorable escheat rules. While this may be an effective way to manage unclaimed property liabilities, it raises the questions: (i) which entity should recognize breakage revenue for income tax purposes and, (ii) assuming that the sale of gift cards is counted as income to the gift card company, which treasury regulation should be applied. The current treasury regulations allow one or two-year deferral base on specific conditions. To answer these questions, retailers and their advisors must understand Treasury Regulation 1.451-5 and Revenue Procedures 2011-18 and 2011-34.

Debra 'CAS' Findlay, CPA is an audit manager with KBKG. Ms. Findlay has more than 20 year experience the accounting/auditing profession and serves non-public entities across a wide range of industries.