Dear Liz: My son is 12 and receives a regular monthly allowance that I’ve been giving to him in cash. I think it might be time for a checking account. I would like to teach him about using a debit card and not overdrawing his account. All the banks that I have called will not open an account for a minor, even a joint account. I’ve heard about prepaid cards being used for allowances, but I’m concerned about the fees.
Answer: You’re right to be concerned. You wouldn’t be teaching financial responsibility — the whole point of an allowance — if you gave him a prepaid card larded with fees to access his own money.
Prepaid cards, also known as prepaid debit or reloadable cards, typically aren’t linked to a checking account as regular debit cards would be. Instead, you can “load” them with cash in a variety of ways and then use the card to spend that money wherever regular debit cards are accepted. Many prepaid cards also can be used to withdraw cash at ATMs.
Unfortunately, many issuers charge fees to open, use and close their cards. Monthly “maintenance” fees and fees to replace cards or talk to customer service are common. Some of the most expensive cards are the ones endorsed by celebrities. Those marketing expenses have to be recouped somehow, and fat endorsement contracts often seem to be paid for with higher-than-average fees.
The Chase Liquid card doesn’t charge most of the usual fees. There’s no fee for activating a card, closing an account, getting paper statements or paying bills. The card can be loaded with money for free at a Chase bank branch or Chase ATM. Withdrawing cash at a Chase branch or Chase ATM is also free. The monthly fee is $4.95, but it’s still one of the cheapest cards available, she said.
The Bluebird doesn’t charge a monthly fee, and activating the card is free if you apply online. The card allows free ATM withdrawals within the MoneyPass network if the cardholder is enrolled in direct deposit; other withdrawals incur a $2 fee. The card can be loaded for free from a bank account or by using cash or a debit card at a Wal-Mart. Loading with a debit card costs $2.
You’ll still face age limits, but there’s a work-around. Most cards have to be opened by someone 18 or older. A child must typically be 15 or older just to have his name on the account as a joint user. (With the Bluebird the age limit is 13.) So you would have to open the card in your own name and then give it to your son to use.
Another option may be to simply wait a year. Some national banks, including Wells Fargo and Chase, offer teen checking accounts for those 13 and older, although the accounts may not be available in all areas.
Dear Liz: A few years ago I finished paying off my debt and now am in the very low-risk credit category. I have savings equal to about three months’ worth of bills and am working to get that to six months’ worth. I’m wondering, though, about an emergency that may require me to pay in cash (such as a major power outage that disables debit or credit card systems, or the more likely event that I forget the ATM or credit card at home). How much cash should a person have on hand? Is there a magic number?
Answer: There’s no magic number. You’ll have to weigh the likelihood you’ll need the green, and the consequences of not having it when you need it, against the risk of loss or theft.
Many people find it’s a good idea to tuck a spare $20 into their wallet for emergencies, and perhaps another $20 in their cars if they’re in the habit of forgetting their wallets or their plastic.
Cash for a disaster is another matter. Power could go out for a week or more, or you may need to evacuate and pay for transportation and shelter at a time when card processing systems are disabled. A few hundred bucks in cash probably would be the minimum prudent reserve you’d want to keep in a secure place in your home. You may decide that you need more.
Dear Liz: I’m wondering how long we really need to keep bank statements, since banks now offer paperless options. My son doesn’t even open the statements anymore; he just views his account information online.
Answer: There’s nothing magical about paper bank statements. If your son doesn’t open them, he probably shouldn’t even get them. He can ask his bank to switch him to its paperless option and save some trees.
The IRS accepts electronic documents, and banks keep account records at least six years. Your highest risk for an audit is the three years after a tax return is filed, so you should be able to download statements if you need them in an audit. There might be fees involved to get these statements, however, so you’ll have to weigh the potential cost against the hassle of storing all that paper. Some people get the paper statements, scan them and shred the originals; others download the statements as they go and store them electronically.
If you don’t need bank records for tax purposes, there’s even less reason for getting paper statements. Eschewing them can reduce bank fees and will certainly save a few trees.
Dear Liz: Twelve years ago I hired a moving company. I must have overpaid them, because in January 2001 I received a refund check for $235. I misplaced the check and didn’t find it until 2003. Ever since then I have made a number of phone calls asking for a replacement. All my calls were to no avail. Can you help?
Answer: No. You typically have six months to cash a check. If you miss that time frame, you can ask the issuer for a new check, but it is usually under no obligation to accommodate you. Trying to deposit an old check can often result in a “returned check” fee from your bank when the check is stopped or returned unpaid.
Dear Liz: I have all my money (less than $150,000) in one small bank. I love my bank, but Bankrate.com’s Safe and Sound report shows the bank having only a single star. I asked someone at the bank about it, and this person said the rating wasn’t important. Is it?
Answer: Of course it is. Your deposits are under the $250,000 limit protected by the FDIC, but a weak bank can fail, which can be disruptive to depositors. The bank that takes over typically doesn’t have to abide by the policies or interest rates promised by the failed bank. If regulators can’t find another bank willing to take over, you may have limited access to your money for a few days until your deposits are refunded to you.
A bank with “very questionable asset quality, well below standard capitalization and lower than normal liquidity” — phrases Bankrate.com uses to describe your institution — probably isn’t the best place to have your money.