Credit and your Kids.

Credit Care for Teens and Young Adults


It's great when parents are willing to help out with their kids' futures, but make sure that you understand all of the implications before you help your kids build credit.

A credit card is a great way to start building credit as a teen or young adult, and many young people receive their first credit card from their parents. Before you hand your teen
a credit card as they head off to the mall, think about whether it's helping (or possibly hurting) their future credit.

Authorized Users vs. Co-Applicants

Often, a teen's first introduction to credit is becoming an authorized user on a parent's credit card. This is an easy way to get a credit card, but it's not usually the best way. In almost every case, an authorized user does not build positive credit of their own, but if the primary cardholders goes into default, it can be reflected on the authorized user's credit report.
In other words, your child does not stand to benefit from your good credit but could suffer
if you fall into hard times.

Placing your child on your account as a co-applicant can have even more harmful consequences. If your credit card company requests a signature from the child, they are likely adding the child as a co-applicant. Think long an hard before you take that step. Being a co-applicant means that they are equally liable for any debts that you incur. If your child is an authorized user and you run up $25,000 in debt that you can't pay, your child could get an ugly stain on his or her credit. However, if you list your child as a co-applicant, the credit card company can expect them to pay back that money, and even take him or her to court!

Make sure you look at all the factors. Even if your credit is great and you have no intention of racking up debt, is there a possibility that a lost job, medical bills, or another disaster could change your circumstances? If there is virtually no chance of that happening, your child might be fine being a co-applicant or an authorized user. However, even if you won't hurt your child's credit, you won't help them much either. The best course of action is to get a card in the child's name tied to his or her social security number only. If you've been thinking of adding your child to one of your cards, call you credit card company and ask to open a separate account in your child's name instead. Since you already have an open account with the company, and are bringing them additional business, you will usually get a better rate for your kid than he or
she could get on his/her own.

Why Start Early at All?

Even if he or she has to open a starter credit card offer with a high interest rate, it will still help your child's credit in the long run, as long as you teach him or her to act responsibly.
The easiest way to help them build good credit is to have them use their card for one use,
paying his cell phone bill or buying gas, and pay it off each month. When your kids get an early start on credit, they'll have a huge advantage over their peers. If you show them how to use their new card responsibly, the credit card company will reward them in the future with higher credit lines and lower rates, so they can gradually use their credit card for more "adult" things, like furniture for their first apartment or a post-graduation vacation.

Don't let common mistakes like adding your child as an authorized user or a co-applicant harm his or her future credit. Imagine what a shock it would be if she attempted to buy a car or pass a credit check for an apartment, and she found out that the credit card she'd been making payments to for years isn't on her credit report. And furthermore, imagine the phone call you'd get shortly after asking for a loan! Your kids' credit can have a negative financial impact on you as well, so start early! Stay safe.

Sincerely,

James
http://www.CC-YES.com
Author: James Marshall

Soupstrapping

A soup peddling entrepreneur uses a credit card to finance his career switch

On correspondence, David Ansel includes two lines beneath his name—“Principal Soup Maker” and “Soup Is Love.” Soup has been good to 33-year-old Ansel, even though he lives in temperate Austin, Texas. Gross sales of the Soup Peddler, the homemade-soup business he started in 2002 after quitting his job in software development, have been growing by 10% a year and are slated to reach $1 million by 2008. The soup is delivered chilled and is reheated at home. His original delivery method, a yellow bike made up of bike scraps, bumper stickers, and a trailer holding a blue cooler emblazoned with a “Soup Peddler” logo, has been retired. Now Ansel’s customers order from an online menu a week ahead and arrange for pickup at the Austin store or for home delivery. These customers are still called “Soupies,” but in the fall of 2005, Ansel added non-soup items such as homemade desserts, quiches, potpies, and sandwiches to the bill of fare. He’s the author of The Soup Peddler’s Slow & Difficult Soups: Recipes and Reveries, published in 2005, and is currently at work on a second book, on entrepreneurship.


David AnselTell us a bit about why and how you started the Soup Peddler.
It started out as a desperation thing in 2002 after I decided to leave the corporate world. I had seen a woman selling gorditas, which are similar to tortillas, from a cart on the street in Mexico. That inspired me. So I went to work. I had never taken a cooking class or worked in a restaurant before getting into the food business—a business I knew had a very high failure rate, by the way!

Did anyone advise you on financing?
I spoke with other restaurateurs. Since food businesses are among the highest risk of all entrepreneurial businesses, they are generally financed by partnerships because banks won’t touch them. I didn’t want to be beholden to other people in the community; my family doesn’t have a lot of money so I didn’t want to borrow from them; and I couldn’t get financing from a bank, so I turned to a credit card.

And I wanted to pull myself up by my own bootstraps. I used one card, a First USA card that had a $29,000 spending limit and a 3.99% introductory rate if you used the convenience checks they offered. The checks work like a cash advance, but you don’t get charged the high interest rate of a typical cash advance. Frankly, I couldn’t believe how good the terms were. I talked to 20 different people to find out what the catch was. There wasn’t one—except that if you missed a payment the interest rate jumped up to 18%. Of course, you have to pay off the inexpensive money first. I borrowed $20,000 and went to work. I never missed a payment.

How long did it take to pay back the credit card loan?
It took about a year and a half to pay back the money. By my second week in business I had 21 regular customers, all from word of mouth, so I felt I was onto something. I delivered the soup in reusable plastic buckets, by bicycle. It was great advertising. After three years in business, I expanded beyond soup to other menu items. Today, soup is less than half of my $800,000 in gross sales.

What percentage of your start-up financing was on the credit card?
Pretty much 100%. I used the $20,000 in courtesy checks until I had some cash flow, which provided the leverage to get the rest of the funds for the Soup Peddler. Pretty soon the two enormous pots I had bought at a used restaurant supply shop were no longer sufficient for making the soup. Neither was my home stove or the refrigerator I used. So I made a deal with a local Thai restaurant to cook at midnight, after they’d shut down for the night. By the end of my first season I had a base of 48 regular customers—people who ordered pretty much every week. That was enough to get me going.

In 2003 I took out a bank loan of $60,000 for my next expansion. I had a decent track record at that point. I found a hip loan officer who had a passion for the creative class and for entrepreneurs. I signed a lease on a 900-square-foot kitchen that allowed me to grow the business to what it is today.

Was there a downside to credit card financing?
I got my credit card loan for 3.99%. That’s a far cry better than any bank will ever give a young entrepreneur. The payback is flexible. I can’t see any downside in my example. I didn’t really need to borrow all that much money, though. It’d be more complicated if I had used several cards and was juggling them.

What role do credit cards play in your business today? Do you use them for ongoing expenses, such as supplies, advertising, computers, and payroll?
I use credit cards pretty extensively to run my business. It can be pretty rough for the Soup Peddler during the summer months—it’s very hot in Austin then, and soup doesn’t sell so well—so I load up on credit cards. I like the Advanta MasterCard. It has great rates and balance-transfer deals such as 0% financing for the first year. Hopefully I won’t have to use credit cards this summer, though, as I’ve expanded into other menu items.

So why pick soup as the basis of the business? Was it the warm, fuzzy connotation?
I picked it because I thought it would have a good shelf life and it would fit into the reusable buckets I wanted to use for the business—the soup was delivered in the buckets. Now I use food-grade plastic bags. It also seemed like an extendable theme. Obviously, as I went on, I realized the power that soup has in people’s lives; it has been a nice, meaningful, artistic vehicle for that reason.

By Karen Bruno

You (the plastic version)

Customized credit cards sweep the market

Gone are the days of credit cards illustrated with boring blocky bank logos that haven't changed since the Cold War. A do-it-yourself credit card design movement is rising to let consumers create cards that match their personalities.

customized credit cardPersonalized plastic is varied and evolving.

The basics
In its simplest form, customization involves choosing a stock image, usually from a selection that arrives with a new card. Capital One, for one, offers stock images that range in theme from the patriotic to the geographic to the artistic (think lighthouses and sandy beaches). There are even cartoon characters such as Dilbert and Daffy Duck.

Capital One also raises awareness for charities with cards bearing the insignia of the March of Dimes, the Juvenile Diabetes Research Foundation and others. Its CureSearch Platinum Debit Card, for example, features a colorful drawing of a cat by a young, three-time cancer survivor, Jacquelyn Wheeler. Each time a cardholder chooses a credit transaction, Capital One makes a donation to the CureSearch National Childhood Cancer Foundation.

Lifestyle choices
Some companies go to even more-detailed customization with offerings designed to provide individuality while promoting a product, a lifestyle, or both.

Owners of the determinedly quirky Mini Cooper car, for example, can flash a customized Visa card graced with a photo of the owner's model and color. The card is from Mini Financial Services, a division of BMW Financial Services North America. The card includes a motoring rewards program, with points for virtually all purchases, and two points for motoring-related purchases such as gas and tolls. The card even earns cash back on the purchase of an actual Mini.

Got a pet? Bank of America, in conjunction with Hill's Pet Nutrition, has launched the PetRewards Visa, which earns points on Hill's pet food, gives discounts on trips to participating veterinarians and clinics, and provides donations to animal shelters. Best of all, you can put your pet's image on the front of the card via a digital uploading system.

Click, copy, customize your card
Thanks to the ease of digital images -- just click, copy, and send -- credit card personalization goes well beyond Miniss and malamutes: More card-issuing companies allow customers to choose photo images for their cards -- within limits. Pornographic images and those that violate copyright regulations are not welcome.

Many companies issue personalized credit cards. Why? Because customers said they wanted it, says Capital One spokeswoman Pam Girardo. Customization benefits customers because, she says, "customers love to 'badge' themselves; people love others to know they're into something like dogs or golf. So customers get to demonstrate their personality and passions while doing something they do every day -- use their credit cards. It gives the credit card a personality. A generic piece of plastic becomes interesting."

More than images
Customized cards aren't just for adults. Teens who log onto the PAYjr Visa Buxx Custom Card site can access features such as an online chore and allowance tracking system provide a financial education. In addition, teens may personalize the image on the fronts of their cards -- and maybe win an Apple MacBook or iPod for creating a hot design in a peer-judged contest.

Some personalizations are a bit more edgy than a happy pet or a favorite vacation pic. For instance, CreditCovers sells a variety of skins consumers can stick on their cards. The company is not affiliated with any card issuer, so there's more freedom for self-expression. CreditCovers are card-sized stickers , with cut-out slots in the middle, so the number and name aren't covered. Designs include the swirly, wavy abstract "Water Series 17 1/2" by Southern California artist Todd Arthur Wolf, based on his watercolor painting, and one called "Mizz Lady Pink" -- a woman's face represented graphically in pink tones -- by L.A. artist Food One.
At around $4.99 each, they're an inexpensive way to display your unique vibe.

By Stephen Milioti

What's in your wallet, Anthony Adams?

The founder of CreditCovers.com shows some skins

Anthony Adams vowed that he was done with credit cards after holding a part-time telemarketing job selling Visa Platinum cards. "I saw how aggressive the card companies were," he says. Yet in February 2006, he founded a company that sells covers or "skins" that you can stick over the front of a credit card, covering a prosaic bank logo with, for example, a hollow-eyed buzzard, its wings spread over a banner saying "Bloodsucking Financial Institution" and with the words "Debt" and "Ruin" appearing on two Doric temples in the background. "It's kind of ironic I started a company that makes covers for credit cards since I'm not a big believer in them," Adams says.

In the past few months, Adams, 26, has sold thousands of the $4.99 covers, which come in nine designs. Right now he sells mostly through his Web site, CreditCovers.com, but several major banks have expressed an interest in marketing the covers. Upcoming skins will feature artwork by young designers such as Todd Francis, the skateboard artist (the buzzard is his design), and Matthew Langille, who designs T-shirts for Marc Jacobs. One skin turns a credit card into a white iPod-like object.

Adams, who has a master's degree in urban planning from the University of Wisconsin at Madison, quit a job as executive director of a nonprofit to start CreditCovers. "We've taken that real estate away from the banks," he says gleefully. He sees a use for the skins beyond rebellion and fashion. "If Spider-Man 3 wants to promote its product by putting its message on a credit card cover, then we've created another advertising channel," he says.

Adams is never without the cards below, which are, of course, skinned.

Type of card: Discover Card
Issuer: Discover
Year obtained: 2000
Business or personal: Personal
Interest rates over its life: "Around 10%"
Fees: None
Credit limit: $10,000. "They've offered to increase it, which I don't want."
Perks: "Cash back on business purchases."
Customer service: "Automated phone tree. I recently had to change my address, and it was surprisingly accurate for a computer automated system."
Current usage: "I use it a lot, but I never carry a balance."
The bottom line: "I don't see the point of going into debt, so I pay off the balance before incurring any charges."

Type of card: MasterCard Debit Card, with PayPal
Issuer: JP Morgan Chase
Year obtained: 2006
Business or personal: Personal
Interest rates over its life: None
Fees: None
Credit limit: N/A
Perks: "I get 5.05% interest through the option they have to invest your bank balance in a money-market fund, which is an amazing rate. I also get a great exchange rate when I travel."
Customer service: "PayPal is great."
Current usage: "Weekly."
The bottom line: "It allows me to access my PayPal account balance at any ATM, or to use it anywhere MasterCard is accepted. It's awesome."

Type of card: MasterCard Check Card
Issuer: Associated Bank
Year obtained: 2006
Business or personal: One of each
Interest rates over its life: None
Fees: None
Credit limit: N/A
Perks: "Great customer service."
Customer service: "I can call a real rep at Associated anytime, and they'll help me out. Calling to have money transferred between my accounts takes about 60 seconds."
Current usage: Frequent
The bottom line: "They don't give me free checks like my credit union did, but they are professional and I trust their ability to execute."