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College Students and Recent Grads

Should You Avoid College Sponsored Prepaid Debit Cards?

Editorial Note: The editorial content on this page is not provided or commissioned by any financial institution. Any opinions, analyses, reviews, statements or recommendations expressed in this article are those of the author’s alone, and may not have been reviewed, approved or otherwise endorsed by any of these entities prior to publication.

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The college experience requires some level of spending money. This can be achieved from earning money or through help from parents. In the case of earning money, it is more likely that the student will have a checking account (and corresponding debit card). However, if parents are contributing to the student’s spending money, then it may seem easiest to get a prepaid college sponsored debit card.

Should or shouldn’t you use a prepaid debit card? The answer is that there is no right answer – you will have to decided for yourself because every situation is different. The key point to keep in mind with prepaid college sponsored debit cards is that there are fees and they are highly unregulated. So, if you are thinking bout using a prepaid college sponsored debit card, weigh the pros and cons detailed below to make an informed decision.

What Is a Prepaid College Sponsored Debit Card?

A prepaid college sponsored debit card is a debit card issued by a bank, in conjunction with your university that allows you to prepay or “load” the card for use. You can use the prepaid card anywhere that accepts the issuer (e.g. if you have a prepaid Visa, then you can use the card anywhere that accepts Visa). With a prepaid card, a certain amount is loaded onto the card and the user is unable to spend more than the amount on the card. This means that there is no overspending and no overdraft fees. However, there are fees associated with these cards have caused skepticism.

What Fees Are Associated With a Prepaid College Sponsored Card?

Each prepaid card is different. However, in general, prepaid debit cards have higher fees than traditional debit cards. Some of the fees associated with these cards include:

  1. Fees to activate the card
  2. Fees to load money onto the card
  3. Ongoing monthly fees
  4. Fees to use the card at ATMs
  5. Fees to speak with a customer service representative.

The specific fees associated with a prepaid card will vary based on the card.

Additionally, the school promoting the card may be getting paid large amounts of money (and the school may even get a cut of the profits the bank makes from students – see more here). This makes it very important to be smart about which card you sign up for. Read through all the terms and conditions. If you feel there is a lack of disclosure for whatever reason, then walk away. You do not want to sign up for something when you don’t know what you’re getting into. You should also do some research to see if anyone has complained about the card or experienced abusive practices from the bank.

Are There Laws In Place For Prepaid College Sponsored Cards?

Currently, there are no Federal laws in place regarding fee limits and requirements to disclose the exact terms of the card. Similarly, the FDIC may not cover your prepaid card. The FDIC insures up to $250,000 for regular debit cards. Whether the FDIC backs your card will depend on the specific terms associated with the card. The result of not being backed by the FDIC means that in the event of losing the money, you are out of luck.

The Credit Card Accountability, Responsibility and Disclosure (CARD) Act of 2009 requires credit card companies to disclose contracts with universities; however, this law does not extend to prepaid debt cards. Therefore, the card companies do not have to disclose the contracts with college for prepaid cards (at least not yet).

How Do I Get A Prepaid College Sponsored Card?

You can sign up for a prepaid college debit card at your university. Most likely, your school will have stands on campus promoting these cards. If not, you can contact the registrar or bank at your university and ask them where you can sign up.

What Else Should I Know About Prepaid College Sponsored Cards?

Having a prepaid debit card means that you cannot spend more than you have in the account. This is good for spenders, however, it may not teach the user how to be responsible with money. Additionally, there are not credit benefits to using a prepaid debit card. That is to say, you do not build credit by using one of these cards. Finally, it is very important to look for the hidden fees associated with prepaid college sponsored cards – as these cards gain popularity, the fees are going up. It is important to consider your situation and whether using a prepaid card makes sense not only for your current needs but also for your future goals.

What Other Options Do I Have?

Parents who would like to be able to easily send their child money and aren’t comfortable with a child getting access to a credit card or account with overdraft options should consider a Bluebird family account.

Bluebird is an AMEX product partnered with Walmart to offer a banking alternative. There is no monthly or annual fee, no activation fee, no cost to send or receive money and no overdraft fees. There are no ATM fees at MoneyPass ATMs, which includes Money Center Express machines at Walmart. There is a high fee to take money out of other ATMs including a $2.50 charge from AMEX on top of the ATM surcharge.

You can find a full fee and limitations list here. Parents can transfer money to a student for free from a checking or savings account or add cash at a Walmart checkout register.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Natalie Bacon
Natalie Bacon |

Natalie Bacon is a writer at MagnifyMoney. You can email Natalie at natalie@magnifymoney.com

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Reviews, Small Business

SmartBiz Small Business Loan Review

Editorial Note: The editorial content on this page is not provided or commissioned by any financial institution. Any opinions, analyses, reviews, statements or recommendations expressed in this article are those of the author’s alone, and may not have been reviewed, approved or otherwise endorsed by any of these entities prior to publication.

SmartBiz Small Business Loan Review

As a small business owner, you more than likely know how difficult it is to obtain an SBA loan. Besides the fact there’s tons of paperwork involved, it can take three to four months just to receive an answer.

smartbiz offers SBA Loans (it’s an SBA approved financial institution), but at a much faster pace. Since it automates everything during the application process (documents can be uploaded), you may actually be able to receive your funds within 7 business days.

SmartBiz is the best of both worlds when it comes to online small business lenders. You get the low rates and long term of an SBA loan, and the funding process is on par with other lenders so long as you work to submit documentation quickly.

If you want to benefit from an SBA loan in a more efficient way, let’s see how SmartBiz can help.

SmartBiz Small Business SBA Loan Details

SmartBiz SBA Loans range from $30,000 to $350,000 on terms of 60 to 120 months. Its variable APR ranges from 6.75% to 9.99%.

Interest rates are tiered depending on your loan amount. For example, loans between $30,000 – $50,000 have interest rates of 8.25%, $50,000 – $350,000 interest rates are 7.25%, and loans from $500,000 to $5,000,000 interest rates are 6.00% – 8.25%. These are true as of date of publish.

You must know how you’re going to use the funds from SmartBiz, as the purpose of your loan influences how much money you can receive:

  • Loans of $5,000 to $25,000 can be used for working capital (and so can all the other amounts)
  • Loans of $26,000 to $150,000 can be used for acquiring another business and refinancing existing, high-interest debt
  • Loans of $151,000 to $250,000 can be used to refinance business debt secured by real estate, or to buy real estate
  • Finally, loans of $251,000 to $350,000 can be used to refinance debt not secured by real estate

SmartBiz has a detailed repayment calculator on its home page in case you’d like to see what your estimated payments might be. For example, if you borrow $150,000 on a 10 year loan at an APR of 6.96%, your monthly payment will be $1,665.31. Overall, you’ll receive $143,683 since you have to account for closing costs and fees.

The Pros and Cons of a SmartBiz Small Business SBA Loan

Pro: SmartBiz’s APRs are the lowest of any online lender, which makes the loan more affordable.

Con: However, it’s one of the only online lenders to have a variable APR. That means the rate is subject to change with the prime rate. That might not be cause for alarm, though. Even if rates rise, chances are the APR will remain the lowest – some lenders have APRs of up to 40%.

Pro: Similar to the APRs, the 10 year repayment term is the longest of any online lender. This also makes the monthly payment much more affordable.

Con: By the same token, “dragging” the repayment period out can make for a more expensive loan, even if the APRs are low. Generally, the longer your term, the more interest you’ll pay on the loan. From our example of borrowing $150,000, 120 payments of $1,665.31 results in a total amount of $199,837.20. That’s almost $50,000 more. Thankfully, there’s no prepayment penalty.

Pro: If you’re looking for an SBA loan, but don’t want to deal with the hassle of all the paperwork, and how time consuming it is, SmartBiz is a great alternative. You can pre-qualify for a loan in 5 minutes and get pre-approved for a loan within 30 minutes.

Con: The use of your loan factors into how much funding you can receive. Other lenders aren’t as strict with how you use the funding.

Pro: If you don’t qualify for an SBA loan with SmartBiz, it works with other 3rd party lenders that may be able to help you.

Con: While the rates and terms are great, the fees aren’t. There’s a 0.00% - 4.00% origination fee, bank closing costs, and a guarantee fee for loans over $150,000.

What Businesses Are Eligible For a Loan With SmartBiz?

SmartBiz says the following characteristics are typical of the businesses it lends to:

  • Operating history of 2+ years
  • Industries served: manufacturing, retail, product, medical, contractor, service, and more
  • Has $50,000 to $5,000,000 in annual revenue
  • Owners are at least 21 years old and are US citizens
  • Minimum credit score of 600 needed
  • Need enough cash flow to handle payments (most important)
  • You can’t have any outstanding judgments, liens, bankruptcies, etc.
  • You also can’t have any criminal record other than minor vehicle violations

SmartBiz also lends to franchises. Overall, it’s looking to lend to well-established small businesses that have 1 – 40 employees, very good cash flow, and are profitable.

We recently received an email from a reader that applied to SmartBiz and was told she needed a 150+ Business FICO score in order to be approved.

Application Process and Documents Needed

As SmartBiz’s loans are SBA approved, a little more paperwork is required than with your typical online lender. However, it’s still much less when compared to what a bank would ask you for. They don’t look in every nook and cranny of your financials, but have the following documents and information ready during the application process:

  • Past personal tax returns
  • Personal financial information (bank statements are key)
  • Previous government loan history for your business
  • Past business tax returns
  • Balance sheet
  • Income statement
  • Management team information
  • Type of business, date of inception, and documentation proving the formation of the business
  • A subordination release signed by your landlord if you want to borrow more than $26,000

Note that larger loans are going to need more documentation. While SmartBiz can have you funded within a week, the process can take up to 3 weeks if you’re slow with submitting any requested documents. The quicker you work, the faster the process moves. It’s better to be prepared ahead of time.

The Fine Print

SmartBiz’s loans don’t have a prepayment penalty, but there is a 4% origination fee associated with the loan.

The biggest drawback is the guarantee fee, which is paid to the SBA. Thankfully, they did away with the fee for loans $150,000 or less, but it’s 2.25% of the loan amount for loans $151,000 and up.

Loans less than $25,000 don’t require any collateral, but loans over $25,000 require a UCC lien on business assets. A personal guarantee is also required from all individuals who own 20% or more of the business.

SmartBiz estimates closing costs are around $23 for loans $25,000 or less, and $317 for loans over $26,000.

Which Businesses Benefit the Most from a SmartBiz SBA Loan?

Businesses that have been around for two or more years, that are on the smaller side of the small business spectrum (need less than $350,000 in funds), and that want to grow and expand will benefit the most from a SmartBiz SBA loan.

Businesses should be in good financial shape overall and not hurting for money. They also shouldn’t be struggling to manage cash flow.

Smartbiz

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Other Alternative Small Business Lenders

When it comes to getting an SBA loan, SmartBiz is your best bet. It’s the first lender to offer SBA loans online. No other lenders come close to the low rates and 10 year repayment term it offers.

However, SmartBiz does have some stricter eligibility requirements, so if you get denied there, try these alternative small business lenders.

If you have a branch nearby, you might want to check out Wells Fargo’s small business loan. You can borrow between $10,000 and $100,000 on terms of 2 to 5 years, and the APR ranges from 6.50% to 22.99%.

Since this is a bank loan, the process and requirements are similar. Wells Fargo places a strong emphasis on cash flow, there’s a once a month payment, and you need decent credit (most likely over 600) to qualify. There’s an opening fee of $150 which can be waived if you sign up for a Wells Fargo account.

Wells Fargo Bank

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FundingCircle offers loans from $25,000 to $500,000 with repayment terms of 6 to 60 months. APRs range from 4.99% to 27.79%, and the origination fee ranges from 3.49% - 7.99%. You need two years of operating history, $150,000 in annual revenue, and minimum credit score of 620 to qualifya.

FundingCircle

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Lastly, in case you don’t qualify for the other two, Lending Club allows you to borrow up to $300,000 on terms of 12 to 60 months with APRs ranging from 9.77% to 35.71%. Origination fees range from 1.99% - 8.99%, and your business only needs $75,000 in annual sales, and two years in business to qualify. Fair or better personal credit is needed.

LendingClub

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Shop Around to Keep Costs Low

Even though SmartBiz SBA loans offer some of the best rates and terms available for online lenders, it does come with its share of fees and costs. You should shop around and compare the overall cost of the loans you get approved for to make sure you’re getting the best deal. Doing so within a 30 day window will have less of an impact on your credit score.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Erin Millard
Erin Millard |

Erin Millard is a writer at MagnifyMoney. You can email Erin at erinm@magnifymoney.com

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Fine Print Alert

Fine Print Alert: CFPB Dishes Out More Fines

Editorial Note: The editorial content on this page is not provided or commissioned by any financial institution. Any opinions, analyses, reviews, statements or recommendations expressed in this article are those of the author’s alone, and may not have been reviewed, approved or otherwise endorsed by any of these entities prior to publication.

Fine Print Alert: CFPB Dishes Out More Fines

In our weekly Fine Print Alert we call out news from the financial community and shine a spotlight on any sneaky changes in the fine print. We also share our favorite reads from the week.

FINE PRINT ALERT

 The CFPB is Ordering Two More Banks to Pay Up… 

Last week the CFPB hit Chase and this week Discover and Citibank are both handing over money.

Discover has been ordered to pay 18.5 million dollars for allegedly engaging in illegal practices for the repayment and collection of student loans. Discover is the third largest student-loan lender by origination volume. The CFPB maintains that Discover used illegal debt-collection tactics, overstated the minimum amount borrowers needed to pay each month and did not give borrowers information about how the borrowers could receive federal income tax benefits. Discover will be returning $16 million to more than 100,000 borrowers as well as giving account credit to about 5,200 who overpaid their minimums. Nearly 130,000 borrowers will receive up to $300 or account credit of $75 for each tax year to amend for their 2011 or 2012 tax returns.

Citibank was fined $35 million by the CFPB and is being ordered to reimburse $700 million to the consumers who were victims of deceptive marketing, unfair billing practices and deceptive collection practices. This included over-stating the benefits of add-on insurance products, misrepresenting the cost of a fee to pay by phone and being enrolled in programs without being qualified.

FAVORITE READS FROM AROUND THE WEB

When smart personal finance habits just become stupid When you start getting your finances in order, it’s exciting. You see the basic concepts and rules of personal finance in action, and, after a while, they start to pay off. This makes it easy to become a personal finance devotee. But even the best financial advice can become counterproductive.Sometimes we try to use these rules when they don’t make much sense. Here are a few instances when otherwise smart personal finance concepts become kind of silly. Kristin Wong shares 4 ways that typically smart personal finance moves can result in some stupid behaviors on LifeHacker’s Two Cents blog.

A choice you make for your money today could cost you as much as $100,000 by the time you retire Erickson and Madland pinpoint two overarching problems with the fee structure of the investment options offered to most Americans through their retirement accounts: First of all, the fees are difficult to understand, and second, they “are often simply too high.” They point out that the better Americans understand the fees, the more likely they are to choose low-cost investments for their savings. Libby Kane shares details of the study from the Center for American Progress on Business Insider.

 

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Erin Lowry
Erin Lowry |

Erin Lowry is a writer at MagnifyMoney. You can email Erin at erin@magnifymoney.com

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