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Letters from the ❤️: March 2024

Letters from the ❤️: March 2024

| March 11, 2024

March is an exciting month of spring skiing, tax documents, women’s history, and National Credit Education Month. If you have an interesting woman to highlight for Women’s History Month, post it HERE to enter a giveaway for a Spa Finder gift certificate.

I would like to share a few tips on the topic of credit education that I learned over the past 20 years of working in finance. Growing up in Russia, credit markets were nonexistent: no mortgages, no credit cards, and most people didn’t have even bank accounts. My view of debt was very negative. With maturity and education, my opinion on credit evolved significantly. I learned that credit can be like oil in the fire: fuel the good growth but also spiral out of control if there is a pattern of living beyond your means.

As most of our clients reside in the good growth camp, this is a topic that I study the most and I would like to share some tips on the following:

  1. How a young person can get a boost on their credit score
  2. The dark side of student loan payment schedules
  3. The importance of doing due diligence on bank and credit products

When teenagers get their first summer jobs and paychecks, it’s a good time to establish a relationship with a bank that has teen friendly checking accounts that don’t charge monthly fees or require regular direct deposit. Ideally, it will be with a bank that teens will have a relationship with for a while and will be opening their first credit card with, a card that will stay with them for a while. The two best credits cards that simply pay 2% back are Wells Fargo Active Cash and PenFed’s. The reason why I like 2% simple vs highlighting certain categories like restaurants or travel with higher points or store-specific cards is that it yields more cash back in the long term. Be mindful of a points trap – it only works if the balance is paid off monthly, otherwise, the interest will offset any benefits of the points.

If parents have a good credit score and payment history, they can help boost their teen’s credit by adding them to their oldest credit card as an authorized user with the teen’s social security number. If everything goes well, the history of the parent’s card transfers to the teen. Make sure to discuss the teen’s usage of the card and set up auto payments. We tried this for our youngest son who is 18 years old, and when he applied for his own first credit card, he had no issues, and his credit history was 18 years old.

Several years ago, I was helping a young nurse with her student loan repayments. Her balance was over $150,000 and she had been paying for several years but didn’t see much progress. When we reviewed her statements for ten different loans, we found that her income-based payment plan was amortizing over a 40-year period. At this pace, most of her monthly payment was going toward interest and she would be paying back almost $400,000. I am a big supporter of investing in education and student loans are helpful in that. However, after graduation student loans need to be addressed with gazelle intensity and reviewed regularly so they don’t become a long-term headwind on your journey to financial success.

My last two cents will be on banks and credit products. We have many big banks, regional banks, small banks, online-only banks, and credit unions. How does one find the most suitable bank? First, decide what is important to you. Is a brick-and-mortar location important to you or you are ok transacting online only? Do you want to have checking, savings, and credit cards in the same place? What are the rates on savings? How competitive are their rates on credit cards, HELOCs, and auto loans? How are they handling privacy? Sometimes online banks offer higher rates on savings, but then the only way to connect your other bank accounts is by linking them with a password which allows online bank access to all your data.

Once you know your non-negotiables, search online and consult with relatives, friends, and tax professionals. I often find that calling my network of banking friends will yield better rates and products than searching online. Another thing I learned is that for business owners it’s especially beneficial to have a good established bank relationship and that smaller regional banks are more competitive, personal, flexible, and supportive.

The bottom line is that we are all different and we have diverse needs. Thankfully we have a sea of choices when it comes to banks and credit product options. Remember, you don’t have to swim alone - we are happy to discuss your needs and help you narrow your choices!


Thank you for reading! Let us know if found this useful or if you have a bank that you love.


With Love,