By ANNAMARIA ANDRIOTIS

In the battle of the plastics, credit cards have lately emerged as the surprise champs, offering fewer fees and better rewards than the typical debit card. But as banks and credit-card companies flood mailboxes with a new round of offerings, experts warn that finding the best deals isn’t getting any easier.

Until recently, debit cards offered a one-two punch credit cards couldn’t match: a convenient way to access money without the fear of going into debt, along with generous reward programs. Banks, however, have cut back on those rewards over the past year — and in some cases have imposed new fees — while credit-cards issuers continue to sweeten the pot. During the first quarter, companies offered 0% promotional rates on credit cards for ten months on average, up from about seven months a year ago, according to CardHub.com, a credit-card comparison web site. Meanwhile, several issuers have eliminated fees: Discover, for example, dropped charges for cardholders travelling abroad, while Chase eliminated the balance transfer fee on its Slate card during the first month the card is opened. And initial cash-back bonuses have jumped to as high as $250, compared to $100 last year.

The new incentives are all part of issuers’ efforts to make credit cards the go-to swipe option for consumers in light of recent regulations. The Durbin amendment, which went into effect last October and is part of the Dodd-Frank Wall Street Reform and Consumer Protection Act, lowered the fees banks receive from merchants when consumers swipe their debit cards, but doesn’t impact fees for using credit cards. Banks say this change will cost them an estimated $6.6 billion a year in lost revenue. To make up for the loss, experts say that banks are trying to lure consumers to credit cards by making them more rewarding while making debit cards less desirable. “With debit cards, there are no resources to offer rewards as much as there were before the Durbin amendment — it removed that incentive,” says Nessa Feddis, vice president and senior counsel for regulatory compliance at the American Bankers Association.

While the offers on credit cards are better than they’ve been in the past, experts say consumers still need to be aware of the perennial drawbacks. Interest rates could rise in the future, or new fees could be imposed. The risks are even higher for cardholders who don’t pay their balance in full each month. “What they’re banking on is that you’ll mess up,” says Bill Hardekopf, chief executive at LowCards.com, which tracks credit-card offers.

For consumers who pay off their balances each month and make all payments on time, however, now may be the time to choose credit over debit, says Odysseas Papadimitriou, chief executive at CardHub.com. On top of earning rewards, responsible cardholders will also boost their credit scores. Separately, as data breaches grow in scale — last month, for instance, it was revealed that up to 1.5 million MasterCard and Visa cards may have been compromised — consumers may find they’re more protected with credit cards than with debit cards. Fraudulent credit card charges are forgiven by banks, but with debit cards, card holders could be on the hook for hundreds of dollars, if not more.

And unlike the days of frozen credit following the market meltdown of 2008, consumers have plenty of offers. Card issuers mailed nearly 4.1 billion credit card solicitations last year — a record high and up 44% from the previous year, according to Ipsos Mail Monitor, which tracks credit-card mailings. Still, only select number of cards are truly consumer-friendly. SmartMoney and a team of experts dug through the cards to find the best new ones with relatively low rates, long-lasting promotional offers and generous rewards.

By DIANA RANSOM

From smSmallBusiness.com

MANY SOCIAL VENTURES—even the ones that eventually become self-sustaining—may never yield enough of a financial return to attract traditional backers or investors. As a result, a social entrepreneur’s task of raising financing poses unique challenges.

For one thing, social ventures are often structured as nonprofits, which means they can’t offer an ownership stake in exchange for capital, like a traditional business might. After all, “a nonprofit doesn’t have equity,” says Rick Aubry, a social entrepreneurship professor at Stanford University’s Graduate School of Business. However, some social enterprises are mimicking equity-like structures to work around the ownership issue, he says.

That’s what Scojo Foundation intends to do. Since 2001, the New York nonprofit has sought to reduce poverty through the sale of affordable reading glasses in poor communities. Today, Scojo is changing its name to VisionSpring and — much like a company going public might do — releasing a prospectus to attract philanthropic investors.

According to the prospectus, VisionSpring wants to raise $5 million by the end of the year to deliver almost 650,000 pairs of glasses to people in Asia, Latin America and Africa. The company also plans to train more than 5,000 village-based entrepreneurs on the sale of those glasses. Similar to a Wall Street prospectus, the document outlines risk factors, from currency fluctuations to natural disasters. Investors will receive quarterly reports. But unlike a traditional offering, VisionSpring’s investors are only promised a “social” return on investment rather than lucrative financial returns.

VisionSpring co-founder Jordan Kassalow, a practicing optometrist, says the prospectus was borne out of frustration. He decided “enough is enough” after watching “everyone work so hard cobbling together funding throughout the year, rather than doing what we should be doing (helping disadvantaged individuals see better).” The company worked with the Nonprofit Finance Fund, a community development financial institution that helps nonprofits secure funding, on the prospectus.

VisionSpring’s story illustrates the difficulties that a nonprofit social enterprise can face when it comes to funding. But even for-profit social businesses have trouble, too. For starters, such companies typically don’t have the potential for market-rate returns, as they often cater to impoverished communities within developing nations. Not to mention, many social ventures have long incubation periods — meaning that years can go by before they will become profitable, let alone sustainable.

Despite these challenges, there are a number of like-minded investors willing to consider the social as well as the financial impact of a business. And, in exchange for that support, some investors may accept little or no compensation. Here’s a look at some of your funding options.

Social Investment Funds

Social investment funds, like the Nonprofit Finance Fund, pool together various sources of funding, such as donations from wealthy individuals, foundations, financial institutions and corporations. These funds differ from regular investment funds as they generally anticipate lower than market-rate returns. Their larger motive tends to be advancing social causes instead.

Additionally, some investment funds are aimed at specific disadvantaged regions or populations. For example, the Acumen Fund, a nonprofit global venture fund based in New York, trains its funding eyes on locations in India, Pakistan and East Africa. Yasmina Zaidman, a spokeswoman at Acumen, says that the fund’s social investors are less interested in reaping financial rewards. Instead, she says, “they are looking to invest in philanthropic ventures; the return they’re looking for is the social impact.”

Foundations

A number of foundations including Ashoka and Skoll Foundation provide seed-stage and growth-stage grants (that don’t need to be paid back) to social ventures. The Draper Richards Foundation for Social Entrepreneurship, for example, provides early-stage grants of $300,000 over three years to social entrepreneurs.

Grants can be tough for for-profit social enterprises to secure. However, foundations also can give loans though “program-related investing” or PRI. These type of investments are legally considered charitable although the foundation doesn’t have to accept below-market rates. A for-profit social enterprise can ask for a loan at little or no interest. “The expectation is that [the money] will be paid back at much more beneficial terms for the recipient” than regular lenders might require, says Aubry, the Stanford professor.

Banks and Corporations

Some community banks may loan you the money to get your social venture started. These banks typically earmark federally-backed funds to lend to ventures with community development or social missions. An example of a bank that offers such loans is ShoreBank based in Chicago.

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Do-gooder corporations often have similar community development missions. For example, Deloitte & Touche and Pfizer both offer support to the Nonprofit Finance Fund. Typically, corporations block off a portion of their budgets to donate funds (or products or services) to socially responsible endeavors. Meanwhile, a number of corporations including Citigroup and Google have set up foundations, which also offer grant money or other aid to social ventures.

Angels and Venture Capitalists

For-profit social enterprises can seek out cash infusions from angel investors or venture capitalists that have a social bent. These investors typically want market-rate returns in exchange for their financial support. They’re partial to entrepreneurs with plans to do good in the world — and usually, they’re willing to wait a little longer (than traditional angels or VCs) to reap returns. For example, The Investors’ Circle, a network of angel investors and VCs, says it invests “patient” capital in companies that address social and environmental issues.

Of course, any entrepreneur who works with an angel or a VC gets more than money. Angels and VCs work closely with entrepreneurs to shape the company, sometimes taking board seats or management positions. A social angel or VC isn’t any different, but will work within your mission to eke out market-rate returns, says David Berge, founder and managing member of Underdog Ventures, a social venture capital firm in Island Pond, Vt. “A social VC is going to be predisposed to like what you’re doing,” he adds.

(“Starting Up,” a weekly column written by Diana Ransom for smSmallBiz.com, follows entrepreneurs through the early stages of launching a business. Write to her at dransom@smartmoney.com.)

Other recent Starting Up Columns

• Starting Up: Becoming a Social Entrepreneur
• Starting Up: Protecting Your Products

By JILIAN MINCER

As Washington wrestles with health-care reform, states have been busy passing their own laws to allow many young adults to remain longer on a parent’s health insurance.

In June, New York’s governor signed one of the most recent measures — a law allowing families to keep children up to age 29 on their employer-provided insurance, even if they aren’t students. The adult child must not be eligible for other coverage, and he or she must work or reside in the state.

The Criteria

More than 20 states have similar laws. In most cases, the legislation extends coverage for young adults until their mid-20s, regardless of whether they are still in school. They typically require that the person not be married and not be eligible for other insurance. Parents usually have to pay more for the coverage, though that varies by state and plan.

“This is one way to decrease the underinsured liability for the state,” says Edward Kaplan, a national health-care practice leader at Segal Co., a benefits consulting firm.

Florida, New Mexico and Washington are among those that have extended coverage to nonstudents up to age 25. In Florida, insurers that offer dependent coverage must cover dependent children until they are 25. They also must offer policyholders the option to extend coverage until the children are 30.

Illinois passed a law last year that extends coverage to unmarried dependents until they’re 26 regardless of their student status, and up to age 30 if they’re veterans and have been honorably discharged.

Parents should check with their state insurance commission or their employers’ human-resources departments to see if their adult children are eligible.

Extending parental coverage is often a better option than getting an individual policy for a young adult. “Dependent coverage tends to be a little richer than individual coverage,” says Joel Cantor, a professor and director at the Center for State Health Policy at Rutgers University. It also typically is less expensive than an individual policy. That’s especially true if the person has a pre-existing medical problem, which could make it difficult to find other coverage.

No Job, No Coverage

Research released in August by the Commonwealth Fund, a health-care research foundation, found that young adults age 19 to 29 are one of the largest segments of uninsured in the U.S. Almost 30% of people in that age group are uninsured because they don’t think they need coverage, are no longer eligible for a parent’s plan or work in entry-level or low-paying jobs that don’t offer insurance.

Sara R. Collins, vice president for the Affordable Health Insurance Program at the Commonwealth Fund, says the problem likely will worsen because of the tight job market.

Lale Iskarpatyoti, a group and health-care practice leader at consulting firm Watson Wyatt, says most young adults “think nothing will happen to them so they look at the cost [of insurance] and don’t get it.”

But she knows the coverage is crucial. Her son — a recent college graduate — has health insurance at his new job. But it hadn’t kicked in yet when he collided with another athlete during an Ultimate Frisbee game. The medical bill for his broken nose would have been thousands of dollars if his parent’s policy had lapsed.

Write to Jilian Mincer at jilian.mincer@dowjones.com

A fresh bout of worries over Europe’s sovereign-debt crisis has investors pulling money from exchange-traded funds tracking U.S. stocks in recent weeks and is spurring what looks like an even bigger exodus from European ETFs. But the flare-up’s most lasting effect may be to convince more traders to pick and choose their Old World exposures.

The biggest Europe-heavy U.S.-traded fund, the $35 billion iShares MSCI EAFE Index Fund (ticker: EFA), with more than 60% exposure to hundreds of stocks around the region, is suffering some of the market’s biggest recent outflows, even though it is ahead 3.5% on the year through last Wednesday. Over the past 12 months, investors have pulled more than twice as much money out of the Russia-heavy $79 million SPDR S&P Emerging Europe ETF (GUR) as the fund currently holds, according to XTF.com. Both cases highlight the new risk aversion and hint at country-level discrimination.

The euro zone’s stresses are creating two separate sets of returns among popular Europe trackers. The worst-performing single-country ETF is the iShares MSCI Spain Index Fund (EWP), dropping nearly 19% year-to-date. The beleaguered Spain fund is bank-heavy, which is one reason it broke beneath its 2009 financial-crisis lows last week. The fund’s loss outstrips even the Global X FTSE Greece 20 ETF (GREK), down about 13% year-to-date.

The most popular bright spot is the $2.6 billion iShares MSCI Germany Index Fund (EWG), up nearly 10% this year. One of the big recent moves sees more investors going long Germany using the country ETF and short a broader regional fund such as the $947 million iShares S&P Europe 350 (IEV). Little wonder: Spanish stocks recently hit their weakest point of the euro era versus German stocks, according to Miller Tabak’s Andrew Wilkinson. The idea now is to discriminate between the ostensibly “strong” European economies and the peripheral weaklings. “It’s definitely a risk-aversion trade,” says Dave Lutz, an ETF trader for Stifel Nicolaus.

Trying to discriminate on a country basis may be a fool’s errand, though. The Germany Index fund’s top-weighted stocks include global conglomerates such as Siemens (SI) and Deutsche Bank (DB) that rise and fall on global trends. The region’s top ETF performers suggest that those who insist on the single-country approach should consider adding an investing style, too. The largely overlooked $4 million Market Vectors Germany Small Cap ETF (GERJ) has risen nearly 12% on the year, and going small while also going German may help investors tap more directly into the country’s relative economic strength.

The two big U.S.-traded high-yield ETFs track different indexes, one of which recently got a refurbishing. The Markit iBoxx USD Liquid High Yield index, which drives the $15 billion iShares iBoxx High Yield Corporate Bond ETF (HYG), changed its rules in ways that expand the constituency of the index. Barclays Capital’s Jeffrey Meli and Bradley Rogoff estimate the new methodology now gives HYG exposure to about half the total high-yield market, making the more diversified of the two big competitors in this area even more diverse; the other is the $12 billion SPDR Barclays Capital High Yield Bond ETF (JNK).

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By RUTH SIMON

The mortgage problems behind the havoc in financial markets climbed back last month, as delinquencies jumped at the fastest pace since last year for many loan categories.

Overall, 6.6% of mortgages were at least 30 days past due at the end of August, up from 5.8% at the end of June and 4.51% a year earlier, according to an analysis prepared for The Wall Street Journal by Applied Analytics, a unit of Lender Processing Services Inc.

“The disturbing thing is that mortgage quality is bad and getting worse,” said Mark Zandi, chief economist of Moody’s Economy.com, which has data showing a similar trend. Mr. Zandi said the latest data “argues that foreclosures will remain very, very high well into 2009 and 2010.”

The rise in bad loans is being driven by higher delinquencies for mortgages originated in 2006 and 2007, when lending standards were loosest.

Mortgage delinquencies have been on the rise for three years, which has led to losses for banks and other financial institutions that hold securities backed by mortgages. As lenders pull back from lending, those actions — along with a weak economy — are circling back and exacerbating an already-troubled market.

All loan categories were affected in the latest data, though the largest percentage-point increase came on subprime loans, where the delinquency rate jumped more than 2.2 percentage points from June and July levels to 24.48% in August.

But other types of loans deteriorated rapidly, too. Delinquencies on option adjustable-rate mortgages, which let borrowers make minimum payments that may not even cover the interest due, jumped 1.17 percentage points, to 14.38% in August. Delinquencies on Alt-A mortgages, a category between prime and subprime, also rose 1.17 percentage points, to 10.73%. In previous months, increases were smaller.

The analysis looked at the performance of 22.3 million loans originated between January 2004 and August 2008, representing about two-thirds of the mortgage market. It includes loans packaged into securities and held in bank portfolios. Loans originated before 2004 are less likely to be delinquent, largely because lending standards were tighter and borrowers are more likely to have equity in their homes.

“What happened in August is that we had the re-emergence of financial concerns and the widening of risk spreads in the market,” said Doug Duncan, chief economist for Fannie Mae. As credit worries worsened, banks tightened their standards. That made it tougher for borrowers with adjustable-rate mortgages to refinance and for homeowners in financial distress to sell their homes, which is causing some of them to fall behind. “Bank loan officers were still tightening, and it was tougher in August to get a mortgage or to refinance than in July,” said Mr. Duncan.

Job losses also are taking a toll on borrowers, said Thomas Lawler, an independent housing economist. Until recently, “so much of the horrendous credit performance has had nothing to do with the economy,” Mr. Lawler said. “Now, we clearly see the employment picture deteriorating.” Efforts to modify loans may have temporarily obscured the weakness in loan performance by reducing the number of loans reported as delinquent, he said.

Data from Equifax Inc. and Moody’s Economy.com, which is based on information from credit reports, show that delinquencies are highest in Florida, Nevada, California and Arizona. Unemployment rose in all four of those states between July and August. The unemployment rate for California rose to 7.7% in August, up from 5.5% a year earlier, according to the Bureau of Labor Statistics. In Florida, the unemployment rate climbed to 6.5% from 4.2% during the same period.

Home sales also were weak in August, according to new data compiled by Real Trends, a trade publication. Its monthly survey of large real-estate brokers, accounting for more than 35% of sales nationwide, showed that completed sales of homes in August were down 17.5% from a year earlier. That was worse than the 14% decline in July from a year before. Seasonal variations may have also played a role in the increase.

The new analysis suggests foreclosures are increasing at a slower pace or leveling off for subprime mortgages and Alt-A loans. That, said analysts, may partly reflect the widening use of foreclosure moratoriums and efforts by lenders to modify troubled mortgages.

While problems first emerged among subprime loans, a number of borrowers with good credit are now running into financial trouble. Nearly 2.4% of jumbo loans made to borrowers with good credit were at least 30 days past due at the end of August, a fourfold increase from two years ago.

The percent of loans in the foreclosure process has roughly doubled this year for option ARMs and for more traditional mortgages made to borrowers with good credit. In addition, the number of loans for which performance is getting worse continues to outpace the number for which borrowers are catching up on their payments.

A separate analysis by UBS AG that looked at loans packaged into securities concluded that delinquencies are accelerating at a “disturbing” pace for jumbo mortgages issued in 2006 and 2007 to borrowers with good credit, though they remain at relatively low levels. On Thursday, Moody’s Investors Service boosted its estimates for losses for securities backed by jumbo mortgages issued in 2006 and 2007. Jumbo mortgages are those too large to be eligible for purchase by government-sponsored mortgage companies Fannie Mae and Freddie Mac.

Both delinquencies and foreclosures continued to climb for option ARMs. The share of option ARMs in foreclosure jumped to 7.8% from 7.3% over the two-month period. Nearly 30% of option ARMs originated in 2006 were at least 30 days past due or in foreclosure 2½ years after origination.

One sign that credit tightening is having some effect: Delinquencies are lower for mortgages backed by Fannie Mae and Freddie Mac that were issued in the first quarter of 2008, compared with 2007 loans backed by the agencies at the same point in their life. Still, the early track record for the 2008 loans is worse than that for loans issued in 2005 and 2006.

“Underwriting has tightened,” said Ted Jadlos, a managing director with Applied Analytics. But the fact that delinquencies aren’t lower, given borrowers’ higher credit scores and tighter loan standards, “tells me that 2008 loans aren’t out of the woods,” he said.

Write to Ruth Simon at ruth.simon@wsj.com

Printed in The Wall Street Journal, page A3