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The most innovative and socially responsible financial product of the decade has come of age as finally there are prepaid credit cards out there that seriously undercut the overseas charges levied by their “real” credit card counterparts.

This time a year ago the best of the UK prepaid credit cards reduced their charges for things like cash withdrawals of your own money, but the move to suspend the 2% to 3% charges levied for foreign transactions on some cards comes at a great time for those off on holiday in the next few weeks.

Many people aren’t aware that just using your ordinary credit card abroad means a “fine” from the card issuer of usually around 2.75% on all your holiday spending. Credit card comparison websites have been recently highlighting these charges to their followers so people can look for alternatives, and to put pressure on the card issuers to reduce costs, but these changes couldn’t come at a better time.

The first commentators to compare prepaid cards gave them a cautious ‘thumbs up’ when they first appeared in the UK late in 2006, but many people couldn’t really see where they fitted in. In the early days, many financial journalists billed prepaid credit cards as “an expensive way to spend your own money”, and an option only fit for people with a poor credit rating.

However like many financial products, prepaid credit cards have evolved and can now been seen as a Twenty First Century alternative to cash and traveller’s cheques.

Section 75 of the Consumer Credit Act means that in the event of a problem with goods or services abroad, you’re protected in the same way as you are at home. Prepaid cards are now available to anyone over 13 years old, and many teenagers are turning to them as a safe and cool place to park their pocket money and spare cash.

Some of the prepaid credit cards for under 18’s are smart enough to not work on online gambling websites or in sensitive locations like adult only stores or off-licenses.

Add all these benefits up, and take into account that there’s no risk of running into debt as these cards offer no credit or overdraft facility, and suddenly their position in the market becomes clear.

Key advantages of prepaid credit cards?

* No chance of spending getting out of hand – with prepaid cards you’re limited to the amount you load on your card, a maximum of £15,000 with the best prepaid cards.

* Control – prepaid cards are a good way to budget for you or your kids. Like a normal credit card you get an online breakdown of spending on the card so you can see the date, amount spent and location of transactions. There are even ‘family cards.’

* Excellent for overseas travel – prepaid cards are a great option if you’re off abroad. They’re popular with students heading off on gap years and children on school trips as parents can reload them from home. Recently reduced charges make them an even better deal.

* No credit check and easy to obtain – although there maybe a small initial set-up fee, most of the prepaid cards are available very easily whatever your credit history.

We’re bombarded on a daily basis by a UK media that frowns upon credit card debt, and that wags a finger in our faces at even the thought of using credit cards to spread the cost of goods or services we can’t quite afford.

It’s fair to say that there are cheaper ways of borrowing money, but few offer such an intoxicating mixture of flexibility, purchase protection and immediacy.

So if you have a collection of plastic in your wallet and you feel like giving yourself some personal pride points for slimming down your purse or wallet during the bleak, post recession austerity, maybe you should consider a private audit of your credit cards.

Do you really need them all? What are they costing you, and what affect are they having on your credit rating?

Its good practice anyway to review your credit card terms once every three to six months just because often card issuers will have made a promotional initial offer (like 0% on balance transfers for 6 months) to gain new business, but once the promotional period is over charges or interest rates may return to their higher normal rates. You maybe better off switching credit cards, or even closing some accounts. So how should you compare and rate your plastic?

Do:

* Consider closing unused or idle accounts. These accounts could be charging you unnecessary fees and are often targets for identity theft. Close the accounts with low overall benefits or with annual fees and higher interest rates first.

* Be aware that you can put the brakes on accounts that have a high interest rate and an outstanding balance. Ask your credit card issuer to close the account to new charges and then pay down the balance as quickly as you can. This is a good way to reduce overall costs. If you have to carry an outstanding balance, make sure it’s concentrated on the card with the lowest interest rate, or consider a new 0% balance transfer credit card, and then close the more expensive ones.

* Periodically check your credit reports online to see the status of your accounts. Look for wrong information on late payments, high balances and signs of identity theft. Your credit report reflects how lenders look at how financial responsible you are, make sure all the information there is accurate and up to date.

Don’t:

* Be careful closing your oldest credit card account, this may have an affect on your credit rating as card issuers and lenders like to see a long track record of borrowing within the cards terms and conditions.

* Don’t close several accounts all at once. Gradually paying down and closing accounts is the safest way forward if you’re unsure about the impact on your credit score or the amount of debt you need to carry. If you want to cancel several credit cards, space the closures over time reducing the chance of attracting negative attention from potential future lenders, say if you want to get a personal loan or mortgage.

* Its good to concentrate outstanding balances on cards with the lowest interest rates, but don’t overload any one or two cards. Your credit rating looks best if you’re using less than 50% of your available credit limits.

* Watch out for closure charges when comparing costs. It maybe that if you give notice to close the account on a certain date in relation to your last payment that you can avoid the charges.

* Continue to check your credit history online after closing any accounts to ensure that the information registered about the account is correct.

On this day 47 years ago American Express opened its doors for business for the first time in the UK.

Holders of the newly issued charge cards could use them to settle their bills in nearly 3000 shops, restaurants and car hire companies in the UK. They could also use them to buy travel tickets. The American Express card was also accepted at 83,000 establishments abroad.

Holders of the US version of the card had been able to use them in Europe for several years before, but only if the retailer was happy to accept the ultimate payment in US Dollars. Many merchants weren’t keen to do this as the paperwork in those days was complex and as a result, it took some considerable time to get paid.

American Express started as an express mail business in New York in 1850, and has grown to become a diversified global financial services house encompassing a wide range of cash back credit cards, charge cards, and traveller’s cheques.

Rated as the world’s 22nd most valuable brand by Interbrand and BusinessWeek, American Express differs from other card issuers in that it’s ingeniously built its business model taking the lions share of all the fees associated with transactions on its cards where other credit card processers like Visa and MasterCard typically have to split the fees with the merchant or retailers bank as well as the card holders bank or affiliated scheme.

American Express has then shrewdly used this extra slice of the action to provide high quality retail rewards and travel services for its card members, and with clever marketing built an enviable reputation as the card of choice for nigh net worth individuals and international travellers. The American Express Centurion Black Credit Card is reportedly the toughest card in the market to get your hands on.

Amex has also been clever in the way it finances its customer’s accounts. Where most banks and finance houses have struggled trying to borrow money on the wholesale markets in the turbulent financial environment of the last 3 years, American Express has continued to fund a large part of its business from the customer cash sitting in uncashed American Express Travellers Cheques which it issues as part of its international travel services.

So whilst its competitors have diversified into less profitable prepaid cards and 0 balance transfer credit cards to keep their businesses moving forward in the recession, American Express continues to maintain it sky high profile, offering quality travel benefits and seemingly limitless travel and retail rewards program.

If you travel on business, their credit cards and services do merit closer inspection. The level of service you get from their Concierge Services, Travel Assistance and Insurance Schemes varies depending on whether you opt for Gold or Platinum Charge Cards, or their more recently introduced credit cards, but all offer a consistently above average level of assistance.

The new American Express Platinum Cash Back Credit Card also offers a class leading 5% cash back for the first 3 months, as well 0% on purchases (APR) for the first 6 months – all with no annual fee.