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credit & debt

What You Need to Know About Pay-As-You-Go Plastic

Slam on the brakes with a card that won't let you run up a balance.

1. Switch from a credit card to a charge card. Charge cards, such as an American Express card, don't let you carry a balance; you must pay what you owe each month. The AmEx Green card costs $95 annually (the fee is waived the first year) and offers a generous travel-rewards program.

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2. Use your bank debit card. Maybe you want to impose the discipline of spending only what's in your checking account. Debit cards are free -- with no interest charges and no monthly fees -- and those that bear either the MasterCard or Visa logo may be used at millions of retailers. If you sign for your purchases, you get the same protections as with a credit card, and you may qualify for rewards programs. Plus, you can take out cash at an ATM or punch in your PIN to get cash at many retailers.

3. Watch out for prepaid debit cards. They look like other plastic, and you may use them like credit and bank debit cards. Banks hoping to replace lost revenue because of restrictions in the CARD Act of 2009 may soon be marketing them aggressively. But prepaid debit cards are loaded with land mines. Cardholders usually pay an activation fee (which can run as high as $19.95), plus a monthly fee (as high as $9.95). There may also be fees to reload the card and check your balance, in addition to an ATM-withdrawal fee. The Kardashian sisters of reality-TV fame launched a prepaid card for teens last November that cost $99.95 for a year. The uproar about marketing such an expensive card to teenagers was so great that the Kardashians canceled the card less than a month later.

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4. This piggy is different. SmartyPig, the online savings Web site, offers a prepaid Cash Rewards MasterCard that costs $4.95 but has no monthly or reloading fees and offers cash-back rewards up to 10% from participating retailers. If you use an ATM to withdraw cash, you'll pay $1.95; but, as with other debit cards, you may request cash at a retailer by punching in your PIN.

5. Get pin money in Paris. Consider the free Travelex Cash Passport card. You can load the card in either euros or pounds, so you avoid foreign-currency transaction fees. Travelex does not charge an ATM-withdrawal fee, but you will pay the overseas bank's fee when you obtain cash. One drawback: If the card sits in your drawer for more than 12 months, you'll pay a monthly inactivity fee.

6. Make a comeback with a secured card. If you don't qualify for a traditional card, you can rebuild your credit by getting a secured card. Make a deposit in the issuing bank; that amount becomes your credit limit. The bank reports your payments to the credit bureaus each month, creating a good payment history. Secured cards usually carry an annual fee and high interest rates -- the BankAmericard Visa Fully Secured card comes with a 20.24% rate and a $39 annual fee -- but credit unions generally charge less. Secure First Credit Union, in Birmingham, Ala., offers a secured Visa card with a 12.9% rate and a $35 fee. To find a credit union near you, go to www.creditunion.coop.

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