What sort of card for this situation? EDIT second question re: FSA

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BuckyBadger
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What sort of card for this situation? EDIT second question re: FSA

Post by BuckyBadger » Thu Mar 14, 2019 7:13 am

After being prepared to spend over$1400 a month on daycare, we have a new situation but there's a question I'm hoping you guys can help me with.

A very close family friend has offered to watch our little girl for the next year. She's close to us but not related to us. She's not a registered day care provider or anything - she just spends time with our little girl like she did with her girls who are now in college. Takes her with her on her errands; goes for walks in the woods; does play dates with other babies.

Because she's our friend and not a professional child minder she doesn't want us to pay her, but she's fine with us paying baby related expenses. I want to pay for play museum expenses, her gas, coffee when they go meet other babies at the coffee shop nearby...

She's also too nice and i don't want to take advantage. She'd never, say, track expenses and give us a bill or anything.

I thought the best thing was to somehow give get a credit card for the baby's expenses.

What's the best way to do this? Can I make her an authorized user on a card of ours? Do a prepaid Visa or something?

I want something that will be accepted everywhere, that isn't a debit card, and that hopefully didn't have a ton of fees although some fees are fine.

What do you geniuses suggest?

SECOND QUESTION!

Before we knew this would happen we set up a dependednt care FSA for $5000. It's too late to change that. What can I use that money on besides daycare? Will it be lost completely or can I pay a penalty rather than lose the whole $5000? I've paid a couple months of daycare already so I can use it for that I think, but there will still be about $2-3k left.

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vineviz
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Re: What sort of card for this situation?

Post by vineviz » Thu Mar 14, 2019 7:26 am

BuckyBadger wrote:
Thu Mar 14, 2019 7:13 am
Can I make her an authorized user on a card of ours?
For the love of all that is sacred, DO NOT DO THIS.
BuckyBadger wrote:
Thu Mar 14, 2019 7:13 am
Do a prepaid Visa or something?
A Visa Gift card is the best option, I think.

Unlike their reloadable cards, which only work on terminals that accept debit cards, a gift card should work anyplace that takes Visa. Which is pretty much everywhere.

If you keep track of the card number you can check the balance yourself online and give your friend a new one when the original runs low.

I'd probably just give her a new card each week loaded with $100 or $200, with instructions to use any balance that she doesn't spend on the child on herself. It might be a backdoor way to get her to accept a little compensation, and you still come out way ahead on childcare expenses.
"Far more money has been lost by investors preparing for corrections than has been lost in corrections themselves." ~~ Peter Lynch

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vineviz
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Re: What sort of card for this situation? EDIT second question re: FSA

Post by vineviz » Thu Mar 14, 2019 7:30 am

BuckyBadger wrote:
Thu Mar 14, 2019 7:13 am
Before we knew this would happen we set up a dependednt care FSA for $5000. It's too late to change that. What can I use that money on besides daycare? Will it be lost completely or can I pay a penalty rather than lose the whole $5000? I've paid a couple months of daycare already so I can use it for that I think, but there will still be about $2-3k left.
If child is old enough, FSA dependent care money can be used on things like summer camps.

Otherwise, baby-sitting is eligible. If you can talk your friend into billing you SOMETHING for her time you can pay her using the FSA.

https://www.fsafeds.com/explore/dcfsa/expenses?take=100

Also, this list of eligible expenses reminded me that au pairs are covered. If this arrangement with your friend doesn't work out, I recommend investigating the process of getting an au pair. Best thing we ever did for our kids when they were young.
"Far more money has been lost by investors preparing for corrections than has been lost in corrections themselves." ~~ Peter Lynch

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BuckyBadger
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Re: What sort of card for this situation? EDIT second question re: FSA

Post by BuckyBadger » Thu Mar 14, 2019 7:37 am

vineviz wrote:
Thu Mar 14, 2019 7:30 am
BuckyBadger wrote:
Thu Mar 14, 2019 7:13 am
Before we knew this would happen we set up a dependednt care FSA for $5000. It's too late to change that. What can I use that money on besides daycare? Will it be lost completely or can I pay a penalty rather than lose the whole $5000? I've paid a couple months of daycare already so I can use it for that I think, but there will still be about $2-3k left.
If child is old enough, FSA dependent care money can be used on things like summer camps.

Otherwise, baby-sitting is eligible. If you can talk your friend into billing you SOMETHING for her time you can pay her using the FSA.

https://www.fsafeds.com/explore/dcfsa/expenses?take=100

Also, this list of eligible expenses reminded me that au pairs are covered. If this arrangement with your friend doesn't work out, I recommend investigating the process of getting an au pair. Best thing we ever did for our kids when they were young.
Thanks for the help!!

I'll do some googling myself, but do you know off hand if reimbursing her for baby sitting will have an effect on her taxes or on mine? I assumed that she would have to be a "business" to be able to pay her from an FSA?

And we would definitely consider an au pair! That sounds marvelous!

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Re: What sort of card for this situation?

Post by oldcomputerguy » Thu Mar 14, 2019 7:42 am

vineviz wrote:
Thu Mar 14, 2019 7:26 am
BuckyBadger wrote:
Thu Mar 14, 2019 7:13 am
Can I make her an authorized user on a card of ours?
For the love of all that is sacred, DO NOT DO THIS.
Vineviz, I'm curious as to your reasons for saying this. If one were to make the babysitter an authorized user with a very low credit limit (say, two hundred dollars), I can't see the harm (although I'm eager to be educated).
"I’ve come around to this: If you’re dumb, surround yourself with smart people; and if you’re smart, surround yourself with smart people who disagree with you." (Aaron Sorkin)

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vineviz
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Re: What sort of card for this situation? EDIT second question re: FSA

Post by vineviz » Thu Mar 14, 2019 7:53 am

BuckyBadger wrote:
Thu Mar 14, 2019 7:37 am
I'll do some googling myself, but do you know off hand if reimbursing her for baby sitting will have an effect on her taxes or on mine? I assumed that she would have to be a "business" to be able to pay her from an FSA?
It shouldn't have any impact on your taxes beyond the FSA and dependent care deductibility questions: I'm not a tax accountant, but as long as you are using money you've already contributed to the FSA it shouldn't complicate your tax return further.

Your friend would need to report the payments as income. If she spends most of the money taking care of the child she'd probably be able to deduct most of those expenses, so the net tax might not be very high at all, but it might make her tax return a little more complex. But if she's already itemizing it wouldn't be much work for her, assuming she keeps track of her expenses.
"Far more money has been lost by investors preparing for corrections than has been lost in corrections themselves." ~~ Peter Lynch

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vineviz
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Re: What sort of card for this situation?

Post by vineviz » Thu Mar 14, 2019 8:09 am

oldcomputerguy wrote:
Thu Mar 14, 2019 7:42 am
vineviz wrote:
Thu Mar 14, 2019 7:26 am
BuckyBadger wrote:
Thu Mar 14, 2019 7:13 am
Can I make her an authorized user on a card of ours?
For the love of all that is sacred, DO NOT DO THIS.
Vineviz, I'm curious as to your reasons for saying this. If one were to make the babysitter an authorized user with a very low credit limit (say, two hundred dollars), I can't see the harm (although I'm eager to be educated).
For one thing, most credit card companies do not allow you to set a limit on a particular user. American Express is the only company I know of that allows this. With most cards, every authorized user can spend up to the entire limit of the card. And while American Express is widely accepted, my experience is that there are a few places that accept Visa which do not accept American Express.

Also, the risk can flow both ways: if OP adds friend as authorized user and then fails to make a payment, that failure will show up on that (soon to be former) friend's credit report.

Entangling finances with people outside the household is very seldom ideal, and IMHO to be avoided if reasonable alternatives exist.

This article is part cautionary tale and part fear-mongering, but it illustrates some of the pitfalls of adding authorized users: https://www.creditcards.com/credit-card ... -rogue.php
"Far more money has been lost by investors preparing for corrections than has been lost in corrections themselves." ~~ Peter Lynch

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leeks
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Re: What sort of card for this situation? EDIT second question re: FSA

Post by leeks » Thu Mar 14, 2019 8:47 am

No need for a card. Keep it simple. Just give her cash every week. Maybe $100 or whatever you think max expenses might be, rounded up. Tell her you don't want receipts and you don't want the change. Ensure she knows that you are fine with her spending it on whatever she chooses, not just on baby. Tell her to ask you for more whenever she needs to pay up front for expenses that exceed the weekly petty cash, a baby music class or museum/zoo memberships or something similar.

If you end up with use it or lose it money in the FSA, and paying her qualifies, obviously you have to figure out a way to make her take the money over the option to lose it!

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leeks
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Re: What sort of card for this situation? EDIT second question re: FSA

Post by leeks » Thu Mar 14, 2019 8:57 am

Another suggestion: make sure you have a good back-up plan for days she can't watch the child. Since you are not paying her, you need to be extra accommodating when she is unavailable due to her own sick days/vacation/appointments/etc. You don't want her to feel like she can't schedule a dentist appointment or stay home when she has a bad cold, since this is an unpaid job that is an incredible favor to you. And you don't want to feel resent toward her if you have to use one of your own vacation days because she has some personal appointment on a weekday.

If you don't have any backup care benefits through work (like Bright Horizons), look for a stay-at-home parent or grandparent/nanny in your neighborhood who usually watches one child but is willing to get paid to watch your child as well on occasion. Perhaps one that is already a part of your child's playdates. Arrange this (rate, etc) BEFORE you need it.

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oldcomputerguy
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Re: What sort of card for this situation?

Post by oldcomputerguy » Thu Mar 14, 2019 9:20 am

vineviz wrote:
Thu Mar 14, 2019 8:09 am
For one thing, most credit card companies do not allow you to set a limit on a particular user. American Express is the only company I know of that allows this. With most cards, every authorized user can spend up to the entire limit of the card. And while American Express is widely accepted, my experience is that there are a few places that accept Visa which do not accept American Express.

Also, the risk can flow both ways: if OP adds friend as authorized user and then fails to make a payment, that failure will show up on that (soon to be former) friend's credit report.

Entangling finances with people outside the household is very seldom ideal, and IMHO to be avoided if reasonable alternatives exist.

This article is part cautionary tale and part fear-mongering, but it illustrates some of the pitfalls of adding authorized users: https://www.creditcards.com/credit-card ... -rogue.php
Thanks. I've learned some new things today.
"I’ve come around to this: If you’re dumb, surround yourself with smart people; and if you’re smart, surround yourself with smart people who disagree with you." (Aaron Sorkin)

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