Friday, February 28, 2014

Minors with Credit Cards-Good idea?

As minors cannot sign a contract until they are 18 they cannot be involved as a co-signer on a card. A parent cannot cosign for their kids as the kids cannot sign on to the card with them. Cosigning for your kids is a relatively straightforward process, both of you will be on the application and both will sign. The parent’s credit will be evaluated for approval. If it is approved, the proper management of the card and the parent’s credit background will elevate their adult child’s credit score. Of course, if the card is not managed well or the parents have a lapse in managing their credit, that can be detrimental  to the young person’s credit score. 

However, being younger than 18 does not lock a young person out of having a credit card. They can be placed on an established credit card as an authorized signer. This gives them all the rights of usage without the responsibility. But it will start to build their score for them provided the parent has a good score to start with. Yes, the minor can start building that FICO score while they are a minor. The best option:  Parents can remove the minor from the account anytime they wish! 

This is especially helpful when the card has been misused.

The major disadvantage of minors with credit cards is their occasional lack of responsibility. They might use the card for parentally unauthorized usages like a Miley Cyrus concert or go hog wild buying MP3’s on iTunes or Amazon. There are a variety of opportunities for minors to misuse a card. It is up to the parent to ensure the child understands the limitations and responsibilities related to managing the card and teach them how their current authorized usage will benefit them in their adult life.

One option that families have in training their kids to manage money is the Meriwest Credit Union Flow Card. The Flow Card is an electronic checking account (no checks allowed) that is managed by a parent and their child. Flow Cards come with free online banking, online bill pay, and mobile banking options. Your child cannot overdraft a Flow Card! The account is ideal for those students who are aged 13-24 years old. It gives parents an opportunity to teach their kids about managing money with a debit card as the parent and the kid will both have access to the account information. This is good training for eventually managing a credit card.

Meriwest Credit Union is an Equal Housing Lender. All accounts are insured by the NCUA to $250,000.

Friday, February 14, 2014

Love, Money, and Joint Tenants

I can understand why married couples are often opting for separate accounts when it comes to consumer credit such as car loans and credit cards. It is mainly because the errors of one spouse normally don’t have an effect on the other spouse’s credit. If a husband has a late payment, it won’t affect his spouse’s credit. That is until they buy a house. The house is a major purchase in which both parties are deeply involved. This usually takes both incomes to make the purchase, thus both spouses are applying for credit jointly. It is usually at that point that a lot of couples start combining their credit.

But in this modern age, there are couples who are maintaining completely separate finances. There may be a variety of reasons for this. As mentioned above, a spouse may have very bad credit or perhaps even a bankruptcy on their record. The spouse may have problems managing a checking account and has repeated overdrafts or had written checks on non-sufficient funds. Many couples find that the best solution is to have a joint account in addition to each keeping an individual account.

A creditor can be justified in attaching those jointly held funds to pay a debt that only one spouse may have incurred. If a marriage is foundering or if a couple has severe disagreements about how to manage money, they may want to maintain separate accounts. With joint accounts, either party can "clean out" the other simply by withdrawing all the funds in the account.

As for savings, checking, and investment accounts it is wise to hold vesting as Joint Tenants or as a Totten Trust. In the case of a joint account, both parties, or tenants, are each other’s beneficiary. Each one is an owner of the account with equal rights of ownership and transaction.

One might explain Joint Tenancy as: Each tenant owns 100% of the account. Should one owner die, the other has the “right of survivorship” and will take over the funds without probate upon the death of the other joint owner. This is the most common form of account vesting for married couples here in California.

A Totten Trust places a beneficiary or multiple beneficiaries on an account. In the case of the accountholder’s demise, the funds go directly to the beneficiary without having to go through probate. It is a very simple process. In the case of multiple beneficiaries  the funds are divided equally between them. A Totten Trust can be very helpful when a couple is hesitant to have joint accounts for any reason but do wish to leave their assets to each other.

Of course, the difference is that in the Totten Trust the beneficiary has no rights to transact on the account while the accountholder is alive. In a joint account, each joint owner has equal rights to transact on the account.

If you have a complex estate or have multiple beneficiaries, it may be helpful for you to have a Family Trust or what is also known as a Revocable Living Trust. These types of trusts allow you to have very detailed instructions on how your estate is distributed. For more information on Living Trusts, please contact an attorney who specializes in family and trust law.

Love is good but it does not pay the bills or pay them on time, nor is love a good retirement planner. Sometimes love has to take a back seat to the realities of financial acumen and management. Today more than ever, your choice of a spouse can make a difference in the way you approach your finances. A spouse with poor credit and poor money skills who lack savings or a 401k could create an uphill battle for spouses who are good at money management. Let’s keep in mind that 70% of all marital arguments are about money! Ouch! Money is often cited as the cause of divorce.

One thing I have heard that is encouraging: If nearly 50% of marriages end in divorce, then over 50% last forever! That’s a stat I can live with.

Financial questions to ask before getting married
Questions you might ask yourself prior to making this financial decision:
  • Do I want a joint account with this person?
  • Do I trust this person to communicate with me about our spending plan?
  • How did his/her parents manage money?
  • How well does this person manage money?
  • Does this person take risks with their investment money or are they conservative? Has this person had a big loss due to a poor investment decision?
  • Will you pay the bills together or is one person to be responsible for them? Which way are you most comfortable?

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FREE Financial Education Class JUST for Teens

Teens: Learn what it's like to be on your own in the Real World.

Whether you're starting high school or about to graduate from college, learn the necessary skills to start making smart money decisions.

Teenagers learn about the real world of
living on their own!
Teens learn what it's like to really live on their own and learn about budgets and how to maintain a good credit rating

Real World Budgeting
Wednesday, February 19, 2014
6:30-7:30 p.m.

Meriwest Credit Union
Chesbro Financial Center
5615 Chesbro Avenue
San Jose, CA 95123

Attend this FREE, fun and interactive class made just for teens! Various life scenarios involving everyday finances are covered:
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  • Learn how your down payment on your first car can effect your payment and interest rate.
Teens, learn what it's like to be on your own in the real world!

Parents are also welcome to attend.

RSVP today to Greg Meyer, Community Relations Manager - or call (408) 365-6328