Gene J. Puskar / AP

It is possible to use a prepaid credit card safely.

It's like cash, only better. Or so say the marketers.

Prepaid debit cards are usable wherever credit cards work, protect your privacy, and are - of course - compact. Not surprisingly, use of the cards has been soaring: Mercator Advisory Group estimates that consumers loaded $77 billion on these cards in 2012, and expects an increase to $168 billion by 2015.

But there is a downside to prepaid cards: All that privacy and ease of use comes with heightened risks. If you lose a card, you stand to lose whatever money is loaded onto it. Even if your card is stolen, you have fewer protections under the law than you would with a credit card. And as a recent $45 million cyber heist showed, prepaid cards in the wrong hands can be a menace.

For thieves or money launderers, prepaid cards "are much easier to turn into cash than credit or debit cards," said Avivah Litan, a security analyst at Gartner. "I just really don't like them. I'd just rather have the cash."

There are also hefty fees associated with prepaid cards. Banks charge varying amounts for issuing the cards, reloading them with additional funds, and even checking balances.

Still, for plenty of people, prepaid cards offer advantages that aren't available elsewhere. Parents give prepaid cards to their teenaged children as a way to keep tabs on how much they are spending. Prepaid cards are also handy for travel and gifts. And for people without bank accounts, or spotty credit records, they're extremely useful.

“I don't see a risk for consumers who want to use prepaid debit cards as long as you follow normal security procedures. It's a great tool for the honest consumer," said Joe Petro, a managing director at Promontory Financial Group and formerly a senior member of Citigroup's security and investigations operations. He can point to numerous instances where prepaid cards were used to commit financial crimes, he added, but "the nefarious use of it is something that I'm not sure affects the daily activity of a consumer. That's not what the thieves are after."

If you want to keep a loaded prepaid debit card, experts have several suggestions for how to make it safe, and financially sensible.

-- Pick a PIN. Use a PIN on the card, and keep that PIN secure. It shouldn't be written down elsewhere in your wallet, or worse, scribbled on the back of the card. And when you are entering the number, position yourself so others can't see or photograph it.

"I think consumers are very secure if they keep their PINs secure and keep the cards secure," said Litan, adding, "Try not to use a PIN that you use everywhere else."

-- Read the fine print. Shop around for reasonable fees, says the Consumer Financial Protection Board's Office of Consumer Education and Engagement. Issuers of these cards charge varied fees for everything from reloading the card to balance inquiries and using out-of-network ATMs.

-- Know the rules. To minimize the hassle and financial hit if your card is lost or stolen, "find out the rules for replacing your card," the CFPB office said. "Write down the card number, security code and customer service number and keep it in a safe place."

-- Be return-ready. Since some stores require that funds be added back to a prepaid card if you return an item, be sure to hold onto your prepaid card until you are certain that you will not be returning anything you bought with it.

-- Keep a lid on it. Don't load your card with more money than you would be comfortable losing.

Don't be afraid to use a prepaid card, if that's your choice. Just be careful out there.

Kelley Holland is a reporter for CNBC.

Credit scores are critically important. They determine your ability to obtain credit and how much you will pay for it. 

A bad score could prevent you from getting a credit card or renting an apartment. It can increase the cost of services, such as cell phone, electric and cable.

And yet, a lot of people don’t know much about credit scores.

A new survey done by the Consumer Federation of America and VantageScore Solutions finds that:

• Two-fifths do not know credit card issuers and mortgage lenders use credit scores to decide about granting credit and pricing.
  Two-fifths incorrectly believe personal characteristics such as age and marital status are used in calculating credit scores.
•  Between one-quarter and one-third do not know when lenders are required to inform them of the credit score used in their lending decision – after they apply for a mortgage, when they are turned down for a loan and when they don’t receive the best price or terms.
•  More than one quarter do not know the key ways to raise or maintain their scores – keeping credit card balances low and not applying for several cards at the same time.
•  More than one-third incorrectly believe credit repair agencies are always or usually helpful in correcting credit report errors and improving scores. They are not.

How can you raise your credit score?
To improve your credit score, do things that show lenders you are trustworthy and a low risk. That includes:

• Pay your bills on time every month.
• Keep a low balance on your credit and charge cards.
• Pay down debt rather than just move it around.
•  Don’t open new credit accounts rapidly.

You should check each of your three credit reports for errors at least once a year. It’s free. Go to www.annualcreditreport.com.

To help you learn more about credit scores, the Consumer Federation of America and VantageScore Solutions have updated their interactive  quiz Credit Score Quiz (English) or Credit Score Quiz (Spanish).

During a TODAY Money web chat on Wednesday, John Ulzheimer, president of consumer information at SmartCredit.com explained the ins and outs of credit reports and answered readers questions. You can read the full chat:

Creditors are often willing to negotiate a significant discount to settle a debt they know the customer can’t pay in full. Millions of Americans buried in consumer debt took advantage of such a settlement offer last year.

Now it’s time to pay taxes on the part of the debt that was forgiven.

“If you had any debt that was forgiven and the amount you saved was more than $600, the IRS considers that taxable income,” said Bill Hardekopf, CEO of Lowcards.com. “You need to claim that on your tax return.”

Let’s say you owed the credit card company $15,000 and they let you settle the account for only $10,000. The $5,000 they forgave is taxable. If you’re in the 15 percent tax bracket, you’d owe $750. Clearly, that’s easier on your budget than the $5,000 you owed, but it could come as quite a shock if you didn’t know about it.

In general, any creditor or debt collector who agrees to reduce the balance you owe by $600 or more is required to report that to the IRS. They file a form 1099-C and send you a copy. 

“People tend to miss this because they didn’t see any cash from the debt settlement and therefore they just assume this is not income,” explained Certified Public Accountant Carmen Aguiar, CEO of The Aguiar Group in Bellevue, Wash. “This puts you at risk of being audited or hit with penalties and interest.”

Credit counselors tell me some people are surprised to get the 1099-C form in the mail.

“A lot of these creditors and debt settlement companies don’t disclose when the settlement is negotiated that the consumer can expect this tax liability later on,” said Bruce McClary, director of media relations with Clearpoint Credit Counseling Solutions.

And there’s no law that requires them to provide this information. So when a letter arrives from a past credit or collection agency, it’s easy to assume that it’s trash and throw it away.

“The way they find out that they owe taxes on the settlement is when they hear from the IRS asking why they didn’t pay a tax liability reported by their creditor,” McClary said.

The IRS expects to get 6.5 million 1099-C debt forgiveness forms this tax season. Tax preparers say it’s important to make sure the information is correct.

“They are not always accurate,” Aguiar told me. “They may show the entire debt, not just the amount that was forgiven.”

The 1099-C is a complicated form. If you get one and don’t understand how to read it, contact a tax professional. If the information is wrong, you need to contact the company and ask that a corrected 1099-C be filed.

“You have a right to dispute the 1099-C if you believe the information is incorrect and you have documentation of that,” McClary advised.

Some types of forgiven debt are exempt from federal taxes. According to CreditCards.com these include: debts discharged in bankruptcy, mortgage debt forgiven in foreclosure, debts cancelled when you are insolvent and some student loan debt. (Read: 6 Exceptions to Paying Tax on Forgiven Debt)

IRS Publication 4681: Canceled Debts, Foreclosures, Repossessions, and Abandonments

Herb Weisbaum is The ConsumerMan. Follow him on Facebook and Twitter or visit The ConsumerMan website. 

The economy is slowly hobbling back to health, but for many Americans the rainy day fund is still looking a little dry and the credit card bill is still looking a little scary.

About 24 percent of Americans have more credit card debt than emergency savings, according to an annual survey released Monday by the personal finance website Bankrate.com.

The survey found that only about 55 percent of Americans have more emergency savings than credit card debt. About 16 percent had none of each, and the rest either didn’t know or wouldn’t answer.

The results are little changed from the same survey Bankrate.com did in 2011 and 2012. The results suggests that, in general, people’s ability to save up for a rainy day and keep a handle on credit card debt hasn’t gotten much worse in recent years - but it hasn’t improved, either.

Greg McBride, senior financial analyst with Bankrate.com, said a big problem is that people’s wages have been pretty stagnant in recent years, even as expenses for things like food and health care have edged up.

“It just leaves less money that can be put toward debt repayment or emergency savings,” McBride said.

Americans appeared to have been sobered by the Great Recession, and some people were able to get a better handle on their credit card debt in the years that followed.

The total amount of revolving debt, which is made up mostly of credit card debt, fell between 2008 and 2010, according to the Federal Reserve. Since then, it has held relatively steady at around $850 billion, the Federal Reserve data shows.

But those aggregate numbers don’t’ tell the whole story, said Lucia Dunn, economics professor at The Ohio State University.

Her research has shown that some people were able to pay off their credit card debt around the time of the Great Recession. But those who weren’t able to get control of their debt during that period are likely still struggling with it, she said.

“For those who were not able to pay off (their credit cards) and were still carrying a balance, that balance is still growing,” said Dunn, who was not involved in the Bankrate.com survey.

Dunn said her data also has shown that people continue to have elevated levels of stress about their debt, even though the recession has officially been over since June of 2009.

 “We may be out of the recession, but debt’s still a looming problem for people,” she said.

The Bankrate.com data also showed that saving up enough money for an unexpected emergency remains a thorny problem.

Nearly 4 in 10 people said they were feeling less comfortable about their savings levels than a year ago, while nearly half were feeling about the same. Only 14 percent said they were feeling better about their savings levels.

They Bankrate.com survey was of a representative sample of about 1,000 adults, and it was conducted in early February.

McBride, from Bankrate.com, said many Americans may have the goal of increasing their savings but find that they have little left over after the bills are paid.

“I think that people care about it. I think most of it is just sort of the inability to make substantive progress,” he said.

Still, McBride said he wasn’t sure that Americans will improve their financial habits once the economy improves For many Americans, he noted, thriftiness has been forced on them because their credit lines have been cut, they’ve suffered a job loss or they’ve hit another financial brick wall.

As the economy starts to strengthen further, he expects Americans will be more likely to spend their extra cash rather than save it.

“At the point where incomes do start to grow, I don’t think it means that the savings rate’s going to go up,” he said. “I think it means that consumer spending is going to go up.”

Maybe you could cash in your rewards points to get on the list.

According to the New York Times, the three major credit reporting agencies have a velvet rope of sorts when it comes to customer service. On one side are VIPs, including celebrities, politicians, judges and other important types, according to the Times’ research.

On the other side: You, most likely.

When you call customer service to make the case that you didn’t order any packages of jewelry shipped to Uzbekistan, you’ll get a phone tree (go figure). But when the VIPs call, they have a live human waiting for them and, according to one lawyer familiar with the practice, errors on their accounts are usually fixed immediately. You will be waiting until the next prime-numbered day after the third working Wednesday of next month.

The Times notes that regular folks may have to deal with the court system to get errors rectified.

The agencies, for their part, say that everyone has access to a live person, or deny that any dual standard exists. Or that there aren’t any VIPs, just prominent people with special circumstances.

Ever had to correct a credit mistake? How’d it go?