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Money Management International Improving Lives Through Financial Education
SUCESS NewsletterFinancial Education Newsletter
Don't walk away from your credit card with a high interest rate. It could hurt your credit rating.

The Debt Advisor

by Steve Bucci
Bankrate.com

Dear Debt Adviser,

My credit is in the "good" range and I have been current with payments on all credit cards. However, one credit card bank is charging me 30 percent interest, and they will not work with me to reduce it. I incurred the charges and want to pay the bill but am tempted to just walk away from that one card. I don't think I'm eligible for debt counseling because I don't want to include any of my other creditors, just this one. Would it make sense to walk away from this one card or keep trying to get them to come down on the interest rate?
-- Kathy

Dear Kathy,

Your letter reminds me of the classic Simon and Garfunkel song, "50 Ways to Leave Your Lover." There are a lot of ways to deal with a toxic lender, but walking away isn't one of them!

As tempting as it might be to stick it to a bank that won't cooperate, it would only cause a multitude of problems for you. If you were to stop paying on your one account that has a high interest rate, here are a few of the consequences you'd likely encounter. First, your credit would most likely move out of the "good" range into the "fair" range or worse.

Second, because most credit card agreements include a universal default clause, your other credit card accounts would likely raise your interest rates to 30 percent because of your default on the one account. Then your cost to get out of debt would increase considerably.

So, before you "walk away, Renee," I mean Kathy, here are some suggestions that would work much better for you to keep your credit in good standing and allow you to pay what you owe. The first thing you might consider is moving your balance to another credit card with a more reasonable rate. Because you have good credit, you should qualify for a balance transfer. Many credit card issuers are offering low interest rates for balance transfers. Before you make the change, be sure to review the cardholder agreement carefully and ensure that the terms are acceptable to you and there are no hidden fees. If the balance is substantial, you may want to move to more than one card. This allows you to keep your balance below 50 percent of the maximum credit limit. Once you go over 50 percent, your credit score can be affected negatively.

If you are in a sporting mood, you might give your existing lender a last try. Let them know you are committed to paying what you owe, and that you would like to continue your relationship with them but cannot afford the 30 percent interest rate. Let the customer service representative know you are prepared to move your balance to another card but say that you prefer not to. Ask whether or not the bank would like to earn the money on a reasonable interest rate for the months that it will take you to pay the balance. I suggest you ask for a supervisor, then a manager and see if climbing the corporate tree will bear some fruit. Always be polite and thank them for their (non) help before you ask for the next level. Be prepared to negotiate a new rate, and keep in mind they might not offer the ideal rate, but might offer one for which you would be willing to settle.

Should your current card issuer be unwilling to give you what you want, then you'll need to move the balance. If you don't want to or can't transfer the balance to another credit card, you could consider a signature, or unsecured, loan from your bank or credit union. My last suggestion is to concentrate on paying this card off as fast as possible with larger than required payments and then tell them to take a hike once the account has been paid off. Just don't cause more problems for yourself by walking away from your obligation.

Good luck!

The Debt Adviser, Steve Bucci, is the president of Money Management International Financial Education Foundation and the author of "Credit Repair Kit for Dummies."


New Beginnings

The MMI Guide to getting your fianances in order for the New Year

As a new year approaches, we look to the past and forward to the coming year and reflect on the changes we want to make in our lives. With January 1st as an easy starting point, we resolve to follow through on those changes we decide are the most important to us.

Frequently we hear about people's resolutions to lose weight, clear clutter, get organized or get out of debt. In fact, these resolutions do not need to be separate commitments, but might be more easily achieved in combination. For example, losing weight and trimming the fat off your budget might be accomplished with the same starting philosophy. A resolution of clearing clutter might include a component of reducing financial clutter as well, thereby helping you achieve your goal of getting out of debt.

We are also used to hearing the old story of a resolution that didn't make it past the month of January. Most often the reason for a resolution's failure was that the resolution was not realistic: it was either too broad, too aggressive or there were too many of them competing for your attention at the same time.

In this guide to getting a grip on your financial life for the New Year, we hope to present you with viable ways to clear financial clutter, set up systems to accurately track your finances, set realistic financial priorities and goals, and be successful in moving toward a healthy financial life in the New Year.

Download the New Beginnings eBook


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The goal of our highly trained professionals is to arm you with the knowledge necessary to take control of your financial situation. Our online seminars stress the development of skills that can assure long-term success. You will gain the peace of mind that comes from improved spending habits, increased savings, and the wise use of credit. Take the first step toward financial wellness by enrolling in a web seminar today!

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Some things are worth paying more for

by Kim McGrigg

MMI Community Manager

I am a big frugality fan; however, there are some areas where I am not willing to compromise. For example, my family believes that happy chickens make happy eggs, so we happily spend the extra money to buy eggs laid by cage-free birds.

Sometimes, there are concrete reasons to opt for a higher priced item. For example, it can be a good idea to spend more for quality. Other times, the reason for buying a higher priced item is simply one of preference. One of our educators once told me that she would only buy Miracle Whip brand mayo and if she couldn't afford it, she'd rather go without.

I think that depriving yourself of small, everyday items you truly love is a surefire way to make yourself miserable. I know firsthand because last Easter I caved and bought the cheaper eggs (in bulk!) and unhappily ate them for days.

It may seem strange for me to be promoting higher spending. However, I believe that money management is more about what you can do with your money rather than what you can’t do. If it is a priority for you to drink name brand soda or chew special gum, make it a financial priority. Since every extra penny you spend on a splurge is a penny that can’t be spent somewhere else, here are some ideas to contain the costs:

  • Cut back on other items that don’t really matter.
  • Buy favorite items in bulk when on sale (note: I do not recommend this for eggs!)
  • Indulge in moderation to s-t-r-e-a-c-h out your splurge.
  • Shop smart by comparison shopping and using coupons.

Do you have a special item you think is worth paying more for?

Comment on this article.


MMI Debt Management Plan Client Corner
Tips for Success

Don't risk missing a payment-sign up for DepositDirect. DepositDirect Authorization allows us to withdraw your deposit from your bank account and save time and money each month. It's secure, convenient and easy! Enroll online today!

Update your account balances online. When you receive your monthly statement from your creditors, login to your MMI account and update your balances. It is important that we have the most accurate balance information possible on file. 

If you would like more information about signing up for a Debt Management Plan through Money Management International, visit MoneyManagement.org.


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About Money Management International

Money Management International (MMI) is a nonprofit, full-service credit counseling agency, providing confidential financial guidance, financial education, counseling and debt management assistance to consumers since 1958. MMI helps consumers trim their expenses, develop a spending plan and repay debts. Counseling is available by appointment in branch offices and 24/7 by telephone and Internet. Services are available in English or Spanish. To learn more, call
800-762-2271 or visit moneymanagement.org.


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