7 Tips for New Credit Users

1. When establishing your first credit, consider using a secured credit card; a card where you have to make a deposit in a savings account in order to establish and maintain the card. The money on deposit is your security for the credit. You now have an additional incentive to be on time with your payments; your own money is at stake. Meriwest Credit Union offers this type of Secured Visa Card. Info on Secured Visa Cards is here.

2. Another secured type of credit option is the credit union share account loan. Most credit unions have this. You make a deposit to an account and then take a loan out against the funds in the account. As you pay it back on time, your CU lets the credit bureau know and it helps get you get established in managing credit. Secured Share Account Loan info is available here.

3. When you get your first credit card, do not celebrate. There are those who like to go out and get a quick pizza or a movie when their new credit card arrives. A new credit card is not a good excuse to go out to spend and celebrate.

4. Use your credit wisely, purchase assets you need. There are too many people in the world who have credit card bills and have nothing to show for thousands of dollars in debt. Pizzas, concerts, and movies are fleeting and soon forgotten. Furniture is a good reason to use the card. That way, when you are on your couch writing the check for your credit card payment, you have something to show for it. You are sitting on your asset. (Hey, that’s a little credit joke!)

5. Avoid gas cards issued by Shell, Chevron, and other oil companies. Those who are new to credit are often unaware that gas purchases on oil company cards have to be repaid monthly. Only repairs and major purchases, (tires, transmissions, etc.) can be paid over time.

6. Check your credit report annually at AnnualCreditReport.com to verify your current outstanding credit and prevent identity theft. Do you see a card on your report you didn’t order or apply for? If you are reviewing your report annually, you can take action fast and stop identity theft.

7. It seems simplistic, have a budget and plan your spending. A good budget can keep you from using your credit cards or help you pay off the debt you already have.

We are starting to set our schedule of Fall Financial Workshops. If your business, school, or organization has a need for this sort of financial education for employees, students, or clients, please feel free to call upon me to arrange workshops for them. It’s what we do to make our community a better place. 

Please contact Greg Meyer, the Credit Union Guy, at gmeyer@meriwest.com or 408-365-6328 if you are interested. 

 

Child Identity Theft

We do a lot to protect our identities. We buy software for our computers to protect us from hackers. We change our passwords on our accounts regularly (or at least we should!). We write “Ask for Identification” on the back of our debit and credit cards. We do all this in an effort to protect our credit and our assets from criminals. We worked hard to build these things and will work equally hard to keep hold of them and guard them from those who would take them from us. How much time do you spend protecting your kids’ identities?

That’s right, I asked about your kids’ identities. Your kids have Social Security numbers and identities just like you do. Sure, they don’t have all the financial baggage that your personal data comes with, but they are just as vulnerable. I hear you thinking, “But they’re just kids! Why do we need to worry about their identities?”

The Bad Guys out there don’t discriminate when it comes to age. The social security number of a fourteen year old is just as good as one from a forty year old; often better as there is no past history. When a minor’s social security number is used to access a credit report, the reports are usually squeaky clean. There is not even a date of birth attached to the record. It is a beautiful clean canvas that a criminal will use to create their false identity.

Every year I meet several high school students who have had calls from collection agencies or have discovered through other means that their personal information was compromised. These students are all under the age of 18 and have credit problems caused by someone else. Sometimes they learn of it when they go to order their first cell phone and discover that a relative who had a previous account cancelled for nonpayment had used the youngster’s personal info to access a new phone and a new cell account. Some do not learn of the identity theft until they have graduated high school and are denied student loans due to a person’s misuse of their personal data. Often, relatives are involved. Each case is its own tragedy.

These students who have had their information compromised have a lot of work to do before they can access credit for themselves. They have to get started on their own credit repair process. In some cases it involves turning in relatives or family friends to the authorities for investigation of identity theft.  

But what about your children’s personal data? How safe is it?

What have you done to protect them? Who has access to your child’s social security number? Have you ever talked to your kids about sharing information? You need to protect your children’s personal data just as you would your own. Medical, school and banking documents that have your child’s social security numbers on them need to be locked up and eventually shredded properly. Ensure that going forward the only people with access to your son or daughter’s personal info is you and your spouse. When the kids are old enough, have that talk with them about what information about them is secret and should never be shared with strangers.

Far too many parents don’t talk about money and credit with their kids and their kids suffer because of it. Don’t be that parent! Prepare your kids for life after school.

Zero Percent Deals – Are they steals?

Zero percent deals always seem so attractive! The idea of not paying interest on a purchase is appealing to all of us. Often we see zero percent deals related to electronics and furniture. We also see them used in relation to new car sales, but those deals are different and I will address them later in another blog.

For years, after the holidays, a local electronics store advertised Mitsubishi big screen televisions for zero percent interest. The concept is: I buy a big screen TV for $1,200. I pay $100 each month for twelve months and at the end of the period that TV is mine. It seems so simple, doesn’t it? That’s just it; the lender wants it to appear simple.

If you ever read these zero percent consumer contracts, you will find that they are consumer traps. Does it seem too good to be true? How can they afford to give this stuff away at zero percent? Very simply, they don’t. They are depending on the consumer to make an error.

If you are one day late with your payment, the lender will change your interest rate to 29.99% APR and back date it. This means they will send you a bill for the interest you would have paid had the account been at 29.99% APR rather than zero percent APR. If there is one dollar left on the balance at the end of the time period, you will receive a bill backdating your interest to day one at 29.99% APR. Why? Because by being late or leaving a balance at the end of the term you have broken the contract and are now subject to penalty interest.

A word of advice. If you are at the point where you think “this is the last payment”, find out what the actual “Pay-off” balance is before making that payment. Pay that amount to be sure that once the term is over, the balance is zero! This same rule applies with any loan once you are ready to pay it off. Don’t assume that your normal payment amount is what you will pay to pay off your loan. I’ll save that discussion for another blog.

The answer to this is for all of us to read our loan contracts thoroughly! READ YOUR CONTRACT. Reading the contract and understanding your rights as a consumer are the best weapons we have to combat those who would want to take advantage of us because they think we are naïve. If you read the contract and found those consumer traps I mentioned above, would you sign it? 

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Most of us have a savings account where we deposit money we are saving. But, are you depositing your vacation money, your next car's downpayment, and money for future Veterinary bills in the same account? Try something different that might help your accounting process; the "You Name It Savings Account" from Meriwest Credit Union. Now you can have a "Vacation Account," a "New Car Account," and a "Vet Bills" account and have them all linked to your online banking! Ask your Meriwest Financial Services Representative for details and rates.