More than blogging about the 10 Teen Money Myths, I’ve also been speaking to many parents while out at football games and school events. The response is the same, stirring great concern about their misguided beliefs especially in regards to credit’s affect on getting a job.
Over the years some important changes have been made to how financial institutions issue credit and loans, establish interest rates and report to credit bureaus. Some changes are good, some not. This is where knowledge is key!
Myth 2: Bad Credit Can’t Keep Me from Getting a Job
Do you see that security camera up there in the corner? Have you read the news? At work crime has risen each year, therefore more employers are expanding all security measures including background and credit checks.
If your teen seeks a career in accounting, finance, fundraising, politics… basically any position in which they will manage money, their credit will certainly play a role in whether or not they are considered for a job. The state laws vary; however in general employers can legally deny a position based upon your credit but are required to show their source of information to the rejected job applicants.
Myth 3: All Loan Companies Have the Same Rates
Just as individual as you and I are, so are loan rates especially when comparing credit unions to banks. First, we all know your credit score is their first consideration. Gone are the days when you could obtain a loan regardless of your credit, (much of the reason behind today’s economic strife but that’s another day, another blog).
I reminded my teens that great credit earns the better interest rates whether you seek a loan at a bank or a credit union. Following that I share with you a basic comparison of banks to credit unions. Simply put, banks are “for profit, often publicly traded companies” vs. credit unions which are member-owned, not-for-profit organizations. Just the mere words “not-for-profit” and as banks are “for profit” clearly states how revenue flows within an organization and how much the customer pays for their operations.
Being member-owned, they have a stated goal of providing services to their membership resulting in fewer hassles and more competitive loan rates. I read an interesting survey that appeared in Consumer Reports lauding the top credit unions for their customer service, rates and fees.
Myth 4: It’s OK To Make Minimum Payments on Credit Cards
There is a credit card balance calculator that I discovered at www.bankrate.com that gave a frightening example that really hits home with why minimum payments are a bad idea.
First, if you are in debt, any financial planner will tell you to pay off your high interest rate debt first. That would be the balance on your credit cards!
So I broke it down with this example:
With a credit card balance $2,000 (by the way this is below the national average)
Interest rate 12%
The minimum payment would be $39.80
It will take you 169 months (16 years) to be rid of your debt. In that time, you will have paid $1,557.62 in interest! See for yourself at: http://www.bankrate.com/calculators/managing-debt/minimum-payment-calculator.aspx
To top that most people rotate their debt by making new purchases which add to the balance and therefore never pay off their debt. Imagine, since half of each payment goes to interest it’s much like paying double for every purchase you make on a credit card (if you pay only the minimum).
For once, my kids saw my point. That in itself was a golden moment.
Visit www.U224U.com to learn more about GTE Federal Credit Union’s U22 checking account for 12 to 22 year olds. Because learning about money is important, no matter what your age!”
Anyway, I thought I would tell you what it is like to have corporate sponsors, like GTE Federal Credit Union. Well, in a word, it’s “cool.” Make that two words.. “totally cool.” You see, at first it was just all about me and writing some songs. Then it was about getting a band together. Now it is about being a part of a business organization that supports me and offers me some killer opportunities. I have gotten to know the people at GTE FCU very well. I even met the President of the whole company! I love promoting their credit union because they are so interested in kids. If you haven’t checked out the U22 program, click this link, www.U224U.com. If you are from age 12 (like me) to age 22 it might be just what you need to get good things going with saving and banking. Even if you don’t have a whole lot of money to manage, you need to have it somewhere safe, right? And whenever you need it, it only takes a swipe of your U22 debit card to get it! And it makes me feel like a VIP when I can use a debit card that is actually mine! As a matter of fact, I just used it to buy my Halloween costume. (I am going to be an M&M. The blue one.) BTW, I plan to say “Trick or Chocolate” this Halloween, instead of “Trick or Treat!”. BBYYEE!!!!