This is what I hear on a daily basis:

Americans are bobbing in a pool of debt so deep that it’s tickling their earlobes.

If we don’t get a handle on the total U.S. consumer debt, we’re doomed.

Those aren’t tough messages to understand.  Too much debt is bad.  We have too much debt.  We need to start acting like responsible adults by paying it all down.  It’s time to embrace the concepts of savings and delayed gratification.

Well, maybe.

A lot of folks will say that the total U.S. consumer debt level, which is around $2.56 trillion, needs to go down.  Not everyone sees it that way, though.

There’s another school of thought, and I hear from its professors on a daily basis, too.

They argue that we don’t have a debt crisis and that consumer spending is the only thing driving our economy.  If we want to get out of this recession, they’ll argue, we need people to buy more stuff on credit.

There’s some support for that perspective, too.  A recent article I found via the Houston Chronicle.  It’s author, Erik Tyson, maintains that we don’t really have a big problem with credit and that things seem to be cruising right along just fine and dandy in that department.

“The recession has supposedly led to increases in family savings, major efforts by families to reduce debt and other belt-tightening measures, so the figures given in the Fed consumer-finance survey probably even exaggerate the extent of the current credit problem,” Vlasenko said.

In summary, Vlasenko says: “As is often the case, the reality is often less extreme and dire than we are led to believe. Sure, some families and individuals are drowning in credit card debt. And some misuse their credit cards.

“But the vast majority of Americans appear to manage their credit wisely.”

Now, it’s not so hard to get a grip on the pro-debt mode of thinking, either.  We don’t have the production and manufacturing base in this country that we once did, so our spending is critical to business success.  This is the same logic that’s led to things like the clunker law–encouraing people to take on debt in order to save the auto industry.

You can pick either of those perspectives and come up with at least a few decent arguments for yourself.  The problem with all of this is that they don’t seem to fit together too well.  You can’t simultaneously encourage thrift and debt reduction while salivating over the prospect of people spending more money.

Now that big picture stuff is a little complicated (and very mutually exclusive, it would appear), but the “on the ground” happenings are just as confusing.

Some people seem pretty happy that we’re putting a dent in the total U.S. consumer debt total.  This recession has led to some belt-tightening and some serious debt reduction, you see.  Apparently, we’re paying down billions and billions in consumer debt every month for the past half year.

If you’re in the “debt bad” group, that’s good news.  Or is it?

You see, a lot of that debt reduction seems to be coming from write-offs and settlements.  The lending banks realize they can’t squeeze green blood from the turnips suffering through this recession, so they’re taking the bad debt off the books.  We’re not really paying down all of the debt.  Some of the reduction is stemming from our simple inability to repay it.

That, as you’d guess, has a nasty impact on credit scores.  Thus, people aren’t getting as much credit.  Less credit extension means it’s harder to boost that total debt number.  Maybe we’re “paying it down” only because we’re not getting more of it.

And that’s scary news if you’re part of the “we need more consumer spending” crowd.  It’s hard to imagine consumers buying their way out of a recession when they can’t pay their bills and no one’s interested in giving them more access to credit.  Banks are slashing credit lines.

Personally, I’m still trying to make sense of it all.  At the risk of not doing my part to help the economy, however, I’m approaching my own life on the basis of what’s best for me.  I love the fine folks at GM, but I’m not buying a new car.  I’m sure that the people running those businesses in the shopping mall are real sweethearts and I know that they can’t employee people if we’re not in there sliding plastic so fast it melts, but I’m opting out.  The Lampsen plan involves reasonable spending, working with cash, and taking care of the future.

If I’m accidentally contributing to a long-term recession, I apologize.  Part of me wonders, though.  If the only way out of this mess is to either bottom out or to get even messier, maybe it’s just time to bottom out.

DISCLAIMER:  I believe in allowing people to spend their money as they see fit.  I also reserve the right to question their judgment.  I believe that if one makes an incredibly bizarre financial decision that it’s only reasonable for them to expect that someone will comment upon it.  I do not hate the wealthy.  I am not filled with a sick green envy of the uber-rich.  I would never argue that a legal product of any sort should be yanked from the marketplace because I perceive it as stupid.

Why the disclaimer?  Because it seems like all sorts of weird side arguments pop up when people talk about the Visa Black Card and I just wanted to make my overall perspective clear before laughing writing about it.

The Visa Black Card, issued by Barclay’s, is a black, carbon graphite credit card designed to compete with American Express’ Centurion Card (which is made of some secret alloy mined on Mars or something).  It’s a high-limit card marketed to the high-income crowd (and those who want to pretend to be part of that crowd).  It has a few selling points.  One of them is the “cool” factor, also known as the silly seeking of over-the-top status symbols that make one appear to be a mega-jerk.

The card itself? Big limit.  Interest rate at 9.9% plus prime.  A 1% cash back for $1=1 point reward program.  You also get occasional random “luxury gifts”, some nice travel benefits and a 24/7/365 concierge service.

The annual fee? $495.

So, for $500 you can get a card that doesn’t have the world’s greatest interest rate and  that has a rather ho-hum rewards program.  Not a great deal.  You can do better.

When I first started paying attention to the black cards and the weird status-seeking creepiness that seemed to go along with them, I thought about that “I Am Rich” iPhone app.  That was the $1,000 application you could buy for your iPhone that did nothing but display a spinning jewel and the message, “I Am Rich”.  Believe it or not, eight people bought that damn thing.

I was ready to write off the Visa Black Card as just another hollow status item desiged to get the “more cents than sense” crowd excited.

The more I read about it, though, the more I realized that there is a small semgnet of the population who might actually be able to use the card in a manner that justified the extreme annual fee and the other dreawbacks of the card.

That’s because of the concierge service.  Having the black card is sort of like having your own concierge on staff.  It’s a great way to get things done and I can understand how someone living a remarkably upscale lifestyle could perceive the benefit as worthwhile.  AdSavvy does a good job of explaining:

Makes sense. For the ultra-rich, buying whatever you want can get boring; they need the ability to actually do something that other people can’t. A good concierge can do that. You need 12 Arabian horses for your daughters wedding?  Call up the concierge, he’ll have them flown in from Dubai. You need a personalized and autographed copy of Richard Dawkin’s The Selfish Gene for your son’s birthday, call up the concierge. The ability to get difficult things done is what sets these cards apart from just a card with a very high limit. Just the knowledge that cardholders have that ability, 24-hours a day, keeps them happy. And that’s what makes this niche so profitable.

I gotta tell you, though, it’s hard for me to take those benefits as seriously as I should when I see so many goobers who behave like Patrick Bateman’s (American Psycho) without the serial killing problem lusting after a tiny piece of carbon graphite.  For better or for worse, the black card really is “I Am Rich” for the wallet instead of the iPhone.

If you drop tens of thousands of bucks on your Visa every year and feel the need to be a big shot or have an actual use for a constantly-available concierge, consider the Visa Black card.

And don’t worry if you’re not really in the states “top 1%” category Visa likes to reference.  People who aren’t necessarily  the best credit risks in the world are getting invitations, too.  I doubt Visa will let that get out of hand, though.  The whole selling point of the card is its exclusivity and the won’t want to blow that.

Once upon a time, when V-8s encased in steel roamed the highways and gas stations wanted your repeat business, you could get a deal on gas if you used the station’s credit card.  The gas station chains wanted to inspire customer loyalty and to make stopping at their particular pumps part of your regular routine.  The card savings weren’t much, but they were a little perk to being a regular customer.

That’s not the way it’s working these days.  In fact, we’ve come full circle.  Today, you can save money on gas by paying with real cash money instead of plastic.

Hundreds of gas stations have started offering special rebates of up to six cents per gallon off for thos customers who are willing to part with paper money instead of just sliding their credit or debit card through the machine.

Why?  Times have changed.  While inspiring customer loyalty was a top priority once upon a time, today gas stations are more concerned with finding a way to combat the processing fees they’re charged for credit card transactions.  Those “interchange fees” are usually around 2% and can sometimes hit 3.5%.  That’s money the gas station is paying out to its card processing services in exchange for handling the plastic transactions.

In many jurisdictions, the law says that gas stations can’t charge you extra for using a card.  That does not, however, mean that they can’t charge you less if you pay in cash.  So, they talk about “cash rebates” and put up signs that make it clear that you can get a few cents off with cash to stay on the right side of the law.  It’s a matter of semantics, but it must be working.  I don’t see too many gas station owners taking a perp walk on the evening news, after all.

I can’t find anyone who’s saying it out loud, but I think there’s another reason for the cash discount.  If you use plastic, you might just pay at the pump.  All you’ll buy in that situation is fuel.  The station owners aren’t making much, if anything, on actual gas sales and can end up losing money on gas when processing fees enter the equation.   If they can get you to walk into the store to pay at the counter, however, they have a shot at selling you a candy bar, a soda, a piece of beef jerky or a pack of cigarettes.  You might even break down and buy that loaf of bread at the convenience store instead of stopping by the supermarket.  When customers buy more than gas, they become more profitable and persuading them to come on into the shop is the only way to make that happen.

So, should you be paying cash for gas?  It is a decent way to save money on fuel.  It’s not going to make you rich, though.  One news station projected the annual savings with cash rebates on gasoline to come to around $15 for the average driver.  Let’s be honest, that isn’t a big deal.  Then again, every penny counts.  It’s your call.

Just remember that securing any real savings is going to now hinge on your ability to resist the siren songs of donuts, candies, soda, coffee, beef sticks and Lotto tickets.  If you walk into the store and make a single impulse purchase you’re going to completely erase any gains made over multiple visits.

Everyone hates paying more than they must for gas.  If you’re hardcore about keeping your fuel expenditures down, consider paying with greenbacks instead of a card.

Some people just love Dave Ramsey’s debt snowball plan. You know, that’s the one where he tells folks to pay off their lowest balance debt and to then apply all of the money previously being spent on that debt to the next smallest until it’s paid. Every time you clear a debt, you roll that money toward the next one and, boom, you’re out from under those bills in record time.

Others think that Dave loves the system more than he loves his math. They advocate a similar approach, but focus on paying down debts with a higher interest rate first instead of working from smallest to largest.

One system is based on psychology, the other is based on logic and math. Either way, the idea is to get that debt reduction moving quickly and efficiently. It’s a good approach, too. But there are occasional problems.

First, you need to get that first debt paid off before anything starts to snowball. For some people who are barely scraping by after paying their bills, that can be tough.

Second, there are times when you’d really like to have a little extra snow to pack onto the ball when you roll into a larger debt that’s going to take a while to pay off. Part of the reason people love the snowball is because of the visible quick results.

That’s why those who are paying down their debts this way might want to consider giving their snowball a little boost by intentionally setting aside extra cash for the paydown when they come in under budget in some area.

Let’s say, for instance, that you’ve set aside $100 to pay your gas bill for March. Luckily, things warm up faster than expected and you only spend $50 on gas. That $50 gain is then applied immediately at the end of the month to the bill that’s directly in line with your snowball.

You can encourage paydowns a little more by applying spare change or even coupon savings on groceries that weren’t previously calculated as part of your budget to the debt. It soon becomes a game of sorts. You’re looking for every possible penny to throw at that bill so you can knock it down and move onto the next one.

That gaming attitude is important, too. If you begin to see this as something you can actually “win” instead of an ugly part of life’s fine print, you’ll discover a reservoir of dedication you may not have thought you had. People often “fall of the wagon” when trying to take control of their finances, but those who see themselves as competing with a chance for victory are much more likely to see things through to the end.

If you’re trying to lighten your debt load and are working with a snowball system, think about anywhere and everywhere you might be able to find an extra dime to pay toward the next bill. By increasing that payment, you’ll keep things rolling downhill quickly. That extra effort can be the best way to get off to a great start and it can also serve as a shot in the arm when things seem as though they’re beginning to drag.

And if you’re tempted even a little bit to spend that extra cash on something else, play a little game. Take the amount of money that you’re considering keeping for an unnecessary purchase and multiply it by the interest rate on your next debt. Add that number to the “principal” you have in your hand. Now, repeat that process for as long as you’ll be paying off your debts if you don’t get your snowball moving.

When that $100 turns out to be over $600 over a ten-year term at 20% interest per annum, you’ll begin to feel a little more excited about applying it to your debt!

Figure this one out.

The experts keep telling us that we have to get credit thawed to everyday consumers like you and me if we’re going to pull out of this economic tailspin. We’re not going to reverse nasty trends including high unemployment rates unless we’re spending. Translation: Credit good.

Meanwhile, another team of gurus is instructing everyone to stop living on credit and to adopt a cash-based lifestyle. The best way to weather downturns is to confront them without a debt load. Translation: Credit bad.

With a lot of distinction-drawing and some headache-inducing mental gyrations, you can almost reconcile those two viewpoints. When you start thinking about the whole credit good/credit bad thing in terms of credit cards.

I think most people would agree that credit card companies aren’t the friendliest bunch. They like to smack people around with junk fees and they use “the fine print” like nobody’s business. They even have this little trick called “universal default”. If you fall behind on your Discover bill, the folks who issued your Visa might just decide to jack you around with a higher rate or a lower limit–even if you’ve paid that Visa bill religiously since the Carter Administration.

Anyway, it’s not surprising that the behavior of the credit card companies infuriated consumers. Enough people griped that it caught the ears of those in Washington. Regulation followed.

That happened in December. The Federal Reserve Board came up with a series of regs to govern the behavior of the credit card companies. The new policies put a stake in the heart of universal default, require more warning for rate changes and greater overall transparency. For better or for worse, a change is coming to the world of credit cards. It’s not coming quickly, though. The new regulations don’t kick in until 2010.

In the meantime, the credit card companies are working on making the “transition”. Depending on who you ask, that means they’re either trying to behave according to the upcoming policies or that they’re trying to wring every last penny they can from the card-carrying populace while they still have the chance.

We’re all in favor of regulation here, right? Well, maybe not.

Some might object on principle, believing that the 1996 deregulation of the industry was a good thing and that only an unfettered market can produce optimal results. Most, however, would probably agree that there’s some room for consumer protection in a business that operates from a foundation of tiny-print contracts and tricky rate alterations that even the smartest consumers can’t really track (or defend against).

Others may object to regulating the industry because it’s bound to hurt the credit card industry’s bottom line. If the creditors can’t continue to make a healthy chunk of change from junk fees and mystery rate increases, they’re going to need to do a few other things. Those options including slashing credit lines to provide greater protection, tightening standards for issuing cards in the first place and doing away with some of the super-low rate offers.

Why should that bother us? If it’s true that increased consumer spending and confidence are essential to come out of this recessionary funk, the prospect of reducing available credit doesn’t sound that good, does it?

Remember, we’re dumping billions/trillions into banks so that they can offer more credit in hopes that will get the economy cooking again. So why would we want to simultaneously give credit issuers a reason to cut back on credit lines?

Seems a little self-defeating, doesn’t it?

Not necessarily. Remember, that credit debate has two sides. The other argues that the very reason we’re in a mess right now is because of over-reliance on credit. Those folks say it’s time we stop spending money we don’t have. Only through more responsible behavior as individuals and as a nation can we hope to beat the recession. They say there’s a lesson to be learned here and that the lesson is not to worship at the altar of credit.

From this perspective, it makes perfect sense to protect people from getting kicked in the face by nefarious credit card companies even if the opportunity cost of that decision is an overall credit reduction. The value of that credit is minimal compared to the value of protecting people from nasty creditor behavior.

Federal regulations of the credit card industry might be good for consumers, but they might not be good for credit card companies.  Which means they might not turn out good for consumers.  Which means helping consumers might prolong the recession.  Then again, maybe it’s the opposite.  Getting dizzy?  Me, too.

I don’t have a horse in this race myself. I think both sides are right. I think we can probably spend our way out of this recession and turn things around for awhile. The question is whether we’ll learn a lesson from the process that allows us to eventually re-gear our economy in a sane fashion. Knowing how likely that is (read: ain’t gonna happen), I’m not going to lose any sleep over whether or not the credit card companies start slashing access to dough in the face of new regulation.

This whole freakish swirl of seeming self-defeat is exactly what happens when convenient shorter-term solutions are at odds with long-term sanity. Throw the always contentious matter of consumer protection and market sanctity into the picture and it gets even crazier.

All I can say is that, on the level of personal finance, there’s never been a better time to pay off your cards, chop them up into tiny plastic shards and walk away from them.  Credit rates aren’t headed south of potential gains from other investments any time soon and even if regs make the industry a little softer in a year, you can’t expect any favors before 2010.

I’m not a collector.  Sometimes, though, I wish I had a penchant for accumulation.  I had that nagging “I should be hoarding something” feeling after I found out just how much some old postage stamps are worth.  It’s amazing.

Obviously, the value of old postage stamps varies considerably based on all the usual factors governing the market prices of collectibles.  A ripped, bent or generally nasty looking stamp ain’t gonna bring as much as its pristine counterpart.  There’s also the question of what stamp you’re looking at.  Some oldies aren’t worth the paper they’re printed on, while others–even some that are relatively recent issues–can bring a bundle.

Which brings us to some of the heavy hitters in the stamp world.  Unless you’re familiar with the hobby, this information might shock you.  I know it took me by surprise.

The Swedish Three Skilling Banco from 1855 or 1857 (I’ve seen it associated with both years) was a pretty common stamp, based on what I can tell.  However, somewhere along the line one of them was printed in yellow instead of the normal green.  There’s only one of the three skilling yellow stamps in existence and you know what happens when there’s serious demand and very, very limited supply, right?  In 1996, the stamp sold for $2.3 million.

American stamps can bring hefty sums, too.  The 1867 Franklin Z-Grill is a perfect example of how the value of old postage stamps can reach lofty heights.  Around twenty years ago, one of the Franklin rarities brought over a cool million dollars at auction.  Apparently, this stamp was originally made in a way that was supposed to make it harder for postage cheats to reuse it.  The special construction wasn’t very efficient, though, so they didn’t print too many of them.

Here’s another big money stamp story.  Back before Hawaii was part of the U.S., it was still a destination for missionaries who hoped to bring Christianity to the island.  These church emissaries sent messages back home via post, using stamps that became known as “Hawaiian Missionary stamps“.  These little numbers were printed on low-quality paper with lousy illustrations.  Very few of the stamps lasted beyond their 1850s issue dates.  As a result, these babies are extremely valuable.  An unused one can bring three quarters of a million dollars.  That’s $750,000 for what was once a 2-cent stamp!

Sometimes, it’s not just about the stamp.  It’s about the way it was used.  The 1840 Penny Black, the first prepaid postage stamp in history, was an English issue and it’s a popular collectible item.  These stamps usually fetch between $240 and $3,000.  But guess what happens to the value of one of those Penny Black stamps when it bears a red Maltese cross cancellation?  It brings the seller over $2 million.

I’m not advising you to dump your other investments in favor of becoming a high-end stamp collector.  Just like any other market, stamps have their ups and downs.  There’s no guarantee that the value of old postage stamps will increase at a rate in excess to more traditional investments (if at all).

However, it is pretty wild to think about the fact that tiny old scraps of paper can be worth millions of bucks.

We all know that our credit scores are important.  It can be the difference between a fast “approved” stamp on a mortgage application and “selling fish to tourists in t-shirts”.

But what is a good credit score?  Is there a magic number?

Sort of.

Here’s the deal.  Different creditors assess their lending habits in different ways.  While one bank might be willing to finance your new car purchase if your FICO rests at 620, another might advise you to move on to the next lot.  One home lender might offer the best possible rate if you’re at 700, another might reserve their best deals for those who are over the 740 mark.

In that sense, it’s tough to pin down what separates “okay” credit scores from the good ones.  There is a general agreement, however, that you’ll have access to credit at good rates if you can get your FICO to 720.

That’s the closes we can get to a magic number.  720.

A CBS report said that those who hit the 720 mark can relax about improving their numbers.  They stated, “The best number to have is 720 or above. If your score is 720, there’s really no need to try and raise it because lenders lump you in the same category as folks with a score of say 800 or 820.”  

BankRate.com reports that the people who come up with the FICO number, the Fair Isaac Corporation, claim that scores of 720 or better “will get you the most favorable interest rates on a mortgage.”

Others, however, argue that 720 isn’t quite good enough.  The Credit Karma blog argues that 720 “is above average credit”.  That falls in line with those who argue that it is possible to get even better rates if you can push your FICO score into the 750 range.  An article at Boston.com demonstrated that those who have 760+ scores do, generally, receive better credit deals than those in the 720 crowd.

Although there is undoubtedly some advantage to bumping up against the holy grail of 800, it seems safe to accept the 720 number as the dividing point between “good” and “not so good”.  If you have a FIC score of 720, you’re unlikely to be turned away from a loan request empty-handed or with a loan featuring a punishing interest rate.

All of this is couched in terms of the Fair Isaac FICO calculation, which is not the only credit scoring system in use.  Lenders don’t always rely on the FICO numbers and may use alternatives like Experians VantageScore.  FICO, however, is the standard-bearer of credit scores and should give you a good idea of where you sit in a general sense.

However, not all credit agencies access the same information and there are differences in interpretation.  Thus, you can’t assume that you’re going to get the credit you want simply because you make it to a 720 FICO.  Your numbers with other agencies might be considerably lower, and that could lead to problems.

That’s why everyone should take a look at their reports from all major agencies, looking carefully both for ways to boost their numbers and for errors and significant variations between reports.

NOTE:  Multiple sources point out that the average credit score in the United States is 723.  That’s right, the average is actually higher than what we usually think of as a good credit score!  Talk about grading on a curve, huh?  Considering the state of the economy and tightening credit, I wouldn’t be surprised to see the average drop while the idea of what constitutes a good number hops up.

Let me preface this by saying that I hate credit card debt.  Yes, I know hate is a strong word… but there is no other way to accurately describe my feelings.  Just saying the words… credit card… gives me chills.  Ugh!

However, on occasion… there may be a valid reason to use a credit card.  So if for some unfortunate reason you must incur credit card debt… Bank of America is the only way to go.

Though I am not a big fan of credit cards, I am a big fan of the Bank of America Cash Rewards Platinum Plus MasterCard and the Bank of America Accelerated Reward American Express Card.

And what is so great about these cards?  There are a few things:

1 - One rewards the cardholder with cash back (1% for every dollar).  The other rewards the cardholder with points… accelerated points (1.25 for every dollar).

2 - No annual fees

3 - APR as low as 9.99%

4 - Has the mieux du meilleur of introductory offers (I am taking a French class J… BTW English translation… best of the best)

Let’s talk about this introductory offer.

0% of balance transfers or direct deposit for 15 months!  Of course there is a 3% transaction fee.  But even that is pretty low… the going transaction rate on balance transfer is about 5%.

Hold on… you guys don’t seem as excited about this as I am.  Did you not see… DIRECT DEPOSIT?  They will deposit the funds directly into your checking account… no questions asked. And a direct deposit of cold hard cash falls under the same terms and conditions as a balance transfer… not a cash advance, which typically have rates of 23% or more.

Bank of America offers the only credit cards (that I am aware of) that will deposit money directly into your checking account.

If done properly, taking advantage of this offer can actually save you money.  Here is how:

Let’s say you’ve got $5,000 and 12 months left to pay on a car loan.  At an interest rate of 10%… that’ll cost you about $275 in interest.  But if Bank of America deposits $5,000 into your checking account… you can use it to pay down your car loan.  This will only cost $150 (3% transaction fee times $5,000).  You’ll save $125, plus you’ll have 15 months instead of 12 months to pay off the debt.

Okay, that may sound like a lot of effort to save $125.  But think of it this way… it takes 2 minutes to apply for and get approved for the card.  It takes 1 minute to authorize Bank of America to deposit the money into your checking account.  It takes another 30 seconds… minute at the most… to write the check to the lien holder of your car.  You would make (or save… however you want to look at it) $125 for 4 minutes of work.  Sounds like the effort is worth to me.

I am not a proponent of creating new debt, but as a debt consolidation tool… these cards rule!

Want to apply for the Bank of America® Cash Rewards Platinum Plus® MasterCard® Credit Card… click here.

Want to apply for the Bank of America® Accelerated Rewards^TM American Express® Card… click here.

Department store credit cards:  Are they the very best way to buy or a disaster of epic proportions just waiting to happen?

All told, they probably fall somewhere in between those extremes.  Overall, however, store credit cards aren’t the best way to handle consumer purchases and most of us would be wise to pay off any store accounts we have and to swear them off forever after.

Store cards might sound like a good idea when the cashier tells you that you can save 15% on your purchase if you apply right that very second.  But remember, businesses don’t keep the lights on because by hurting their bottom line.  That discount may look like a great giveaway to the consumer, but that isn’t necessarily the case.

Why?  There are a few reasons.  First, research shows that people who use plastic spend more than those who use cash.  The stores know that and they want you to spend more.  Thus, they alleviate the pain involved in handing over real money by giving you a handy-dandy card.  Second, these cards generally come with interest rates so high that they guarantee profitability for the store regardless of whatever up-front discount they might use as a sign up inducement.

And those interest rates are probably the number one reason to avoid store-issued plastic.  They often reach levels as high as 20% and they may come with an assortment of other sneaky fees and expenses, making them incredibly expensive to maintain if you aren’t clearing your balance almost instantly.  Before you say, “that’s what I’d do,” ask yourself why you’d even consider financing a purchase if you had the cash available in the first place.

There may be two exceptions when it comes to avoidance of store credit cards.  Store credit is usually easier to get than bank credit.  Macy’s is probably more generous in terms of approvals than American Express.  That makes department store credit cards an option for those with no credit history who are looking for a way to demonstrate that they can be responsible credit users.

It also serves as a way for those who have significantly damaged their credit rating to start rebuilding a record demonstrative of reform and responsibility.

If you fall into one of those two groups, you might want to look into a store credit card.  However, you need to understand the best way to handle an account if you open it.

Latoya Irby from About.com does a nice job of laying out a responsible approach to department store card use.  She recommends limiting the number of cards, keeping balances at no more than 20% of the credit limit, paying balances on time and in full, and never making additional purchases until you’ve zeroed your balance.  If you approach a store card with this perspective, it may be possible to use it to your advantage if you fall into one of those two narrow categories.

Most of us, however, are better off politely declining that discount opportunity at the checkout counter.  We should be paying with cash.  If we are forced to use credit, we’ll be much better off using a bank-backed credit card with a better interest rate than the store-sponsored alternatives.

Department store credit cards can be very attractive–especially during this time of year when we can be very tempted to go over-budget in order to finance more holiday spending–but when you run the numbers and look at the massive interest rates associated with their use, store cards just don’t make a great deal of sense.  The better solution, as is so often the case, is to live within your means.

Most of us have a few people on our holiday gift lists that present huge challenges.  Try as we might, we can’t figure out what to actually give these folks.

We used to take care of these problematic recipients by sticking a gift certificate to a popular store in their holiday card or stocking.  That’s not a bad solution.  It gives the recipient a chance to find something that they really want instead of forcing them to pretend as if they’re pleased with an ill-fitting gift.

Gift certificates, however, have some limitations.  They’re issued for a specific store, which decreases the range of options available to the recipient.  Even if you choose a certificate from a popular store, there’s a chance that the recipient doesn’t shop there, that there isn’t a location near them, or that the shop in question simply doesn’t carry what the recipient would like.  It’s better to give a gift certificate than to send a box of aged steaks to a vegan, but it’s still falls short of being an optimal solution.

Enter gift credit cards.  These are “credit cards” in the sense that they work just like a Visa, MasterCard or Amex, but there really isn’t any actual credit involved.  The cards are prepaid and loaded with funds by the purchaser.  Unlike other prepaid credit cards, they generally can’t be “reloaded” after use of the original funds.

In theory, this will allow the recipient to buy something he or she really wants anywhere that takes major credit cards (which is just about anywhere).  It solves the “perfect gift” problem and skirts the inherent limitations of the good ol’ gift certificate.

The flexibility and guaranteed “perfect fit” of prepaid gift credit cards makes them a popular gift idea.  That popularity among consumers has resulted in a variety of product offerings.  You can purchase cards from a number of vendors and some are better than others.

Here are a few things to consider when purchasing a gift credit card:

They aren’t real credit card substitutes. You can buy a pair of pajamas that actually fits at JC Penney’s with one of these cards, but you can’t reserve a rental car at Avis.  In some situations, you need a real credit card to get the job done and gift cards just won’t work.  If the recipient wants a few books from his or her favorite bookstore, a gift card is great.  If he or she wants to book a flight or a hotel room, however, it isn’t going to happen.  Keep your recipient’s probable intended uses in mind when making a purchase.

The devil is in the details. Not all gift credit cards are created equal.  You need to check the “fine print” when making a purchase in order to acquire an optimal gift.  Online Credit Professor explains some of the problems your recipient might encounter if you don’t make a smart purchase:

The problem with gift credit cards is in the fine print. Most of them charge many fees when the card is used, so the recipient of the gift card does not get the face value of the card - a fact that many gift givers do not realize. Another hidden problem is that many of these cards expire within a certain number of months of purchase, or alternatively within a certain time after the first use. So, make sure you understand the details before you buy.

If you need to buy someone a gift and you have absolutely no idea what they’d really enjoy or use, a gift debit card can be a great solution.  Just consider the limitations and check the specific card terms before making a purchase to improve your odds of providing someone with the happiest possible holiday.