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.

Over Your Head Financially? Here are your top ten indicators...

 1. Carrying a balance on a credit card. If you are not paying them off, you are paying interest. If you could shift all the interest you paid on your consumer credit cards to your retirement account, how rich would you be? 

2. You use payday loans to make ends meet at the end of the month. Bad consumer! 

3. You’ve been turned down for a consolidation loan. This is a sure sign you are already over-extended and that your debt-to-income ratio is too high. Time to budget your expenses and start paying down what you owe! 

4. You’re hiding your spending behavior from family members. This red flag indicates that you are aware of your personal finance problems, but are unable to acknowledge it. Fighting with your spouse is a related indicator as financial troubles often lead to domestic trouble.

5. You finance your vehicle for more than five years. This may be a clear sign that you’re buying more vehicle than you can reasonably afford.

6. You get more than one late notice per year. On occasion, everybody may let a bill fall through the cracks and forget to pay it. But if you find yourself getting multiple late notices for bills, especially for utilities, then that’s a signal that your finances may be in serious trouble.

7. You get more than one bounced check per year. Again, most folks have had an occasional overdraft of their checking account. But if this happens more than once per year, it’s usually a sign of trouble.

8. You need a co-signer to get a loan. Those without a credit history can ignore this warning sign. However, for everyone else, the need for a co-signer indicates that banks no longer find you credit worthy.

9. You find yourself borrowing from your family and friends. We have heard that borrowing from friends or family is a surefire way to sow the seeds of discontent — especially when you fail to pay the money back.

10. You lack an emergency savings account of at least three months living expenses. Those who are living from paycheck to paycheck can be completely derailed by even the most modest unexpected expenses, such as the need for major car repairs.

Credit: Credit Unions are providing their members and the public with more financial education classes than ever. This is done for free as a community service to their neighbors. Yeah! 

Debit: Over the past year, several national banks have raised fees on their checking overdraft and non sufficient funds transactions. Boo! 

Our Next Financial Workshop:

May 22nd - Preventing Identity Theft -6:30pm
Meriwest Credit Union Main Office at 5615 Chesbro Ave, San Jose CA 95123
RSVP with Greg Meyer at gmeyer@meriwest.com or call at 408-365-6328

The Long Shadow of Bad Credit in a Job Search: How does your credit effect your ability to find a job? This story, from New York Times Business Day section, will give you some insights into how hiring managers view your credit report. Click the link and learn! 

 

Len Penzo - One of the great financial bloggers! Check out his blog here: LenPenzo.com

Happy Valentine's Day! Save your Money!

On Valentine’s Day, we tend to spend money on our significant others. Like many holidays, it is conspicuous for its spending. We buy flowers, jewelry, chocolates, and meals all in the hopes that he or she will be our Valentine. They say you have to “Spend money to make money.” I wish there were an easy rhyme that goes along with spending money for your Valentine’s date! How about “Spend money to get a Honey?”  

A dozen roses can cost from $40 to over one hundred depending on where you get them. Today, many restaurants are advertising special deals for Valentine's Day. Several are advertising $150 complete four course meals for two. Maybe I'm cheap, but for $150 they should change the oil in my car, too!

Couples do a lot of things together; they dance, they dine, and they drink just to name a few. But one of the most significant things they can do for themselves is save money. There was an old saying that “Two can live as cheaply as one.” For obvious reasons we know that is not true, but two can live together cheaper than two living apart. What do I mean? The sharing of Expenses.

When we get married or decide to share our home with someone, we can realize some significant savings in our expenses. By combining our budgets, we can find ourselves with a lot of extra cash. We share rent with someone. We also share our utility bills such as cable and electricity. Buying our ingredients and cooking most of our meals at home rather than eating out can almost make it seem as if two can eat as cheaply as one. The challenge is to take the savings amount of each of these categories and invest it in a savings or money market account. Couples need to have commitment, discipline and focus to do this.

Spare change is always good. We might have a savings plan and budget our spending, but there is always spare change in our pockets. Save that change and turn it in annually for a nice savings surprise. I average $250 annually in accumulated coins from my pocket. I have been told that is low!

These are adhoc methods of saving. The best way is to have a plan and a goal for your dollars. A simple goal of $50 in savings deposited each month at a savings interest rate of 3.5% can turn into $3,282 in five years! (Rates are low now, but with inflation, they will be going up in the future.)

Do we need two cars? Selling one car can save you a payment, insurance, gas, maintenance and repairs on it. Get a monthly fast pass for the local metro and bank the rest!

But there are also a lot of compelling reasons to save:

Young couples typically get invited to other couples’ weddings and showers with gift obligations. Savings can offset some of the expense of this compulsory gift giving.

Appliances break! Hair dryers, curling irons, razors, microwaves, toasters, blenders, mixers, etc can break and need replacement. How many women can go without a hair dryer or curling iron for even a day? How many men can go without a coffee maker or microwave? These are expensive to replace and can be trouble for your monthly budget. Save money for their replacement. 

Cars breakdown. Tires go flat, hoses leak, batteries go dead, and belts break. A broken transmission can cost you over $1,500! Just owning a car is a good reason to save. 

Is there someone the couple loves who lives far away? A grandparent, parent, or other favorite relative? Suppose that relative became gravely ill? Would they want to see them? Emergency travel is another good reason we save! Considering the expense of traveling, this may only be possible thru savings. (or the dread use of credit).

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Our next financial workshop is for teens: Reality Based Budgets - The Post College Simulation
February 20th at 6:30 PM at our Main Office 
Meriwest Credit Union
5615 Chesbro Ave
San Jose CA 95123

Please contact gmeyer@meriwest.com to RSVP for the workshop.

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