In this episode of Getting Money Right, we’re continuing to answer some of the most common money questions from our listeners. Knowing the answers to some of these questions can help you tackle some of the challenging financial decisions you might face in the future with a greater chance of success.
1. How do I negotiate with my credit card company?
- Take time to collect information needed to be in the best position to negotiate a new % rate with your credit card company. Collect the following facts:
- Current interest rate and the amount owed.
- Length of time the account has been open.
- FICO score.
- Level set expectations by researching current credit card interest rate and determine how much you are willing to pay.
- When researching, inquire only, but do not apply as traces of inquiries can hit your credit history leading to potential negative impact on your credit score.
- Positivity, patience, and perseverance
- Go in with a win/win mentality. You have nothing to lose by asking. You both win when your credit card company gets to keep your business at a lower rate!
- When negotiating with your credit card company, be prepared, I’d even encourage practicing what you’ll say with a script. Be patience and gracious in your exchange with customer service, but also be persistent.
- Keep your conversation simple
- Representative: How can I provide you with exceptional customer service today.
- You: Hi <Representative Name>. I am hoping you can help me out here. I have been a loyal customer for ____ years and have made payments on time. I noticed that my rate is pretty high compared to other offers I have received. Is there anything that you can do to help lower my rate?
- Representative: Comes back with an offer that doesn’t quite hit what you had in mind.
- You: I really appreciate you looking into this, but I am looking to be at a ___% at a minimum to match the offer I received with similar structure. Is this the best that can be done.
What if negotiating doesn’t work to lower your rate?
- Be ready to make the switch.
- If you are not able to pay off the balance in full to close the account, then decide which credit card company offers the best rate for transferring the balance to a lower rate. Use google search engine - www.google.com
- Once you narrow down your selection, pick the top 2 choices from your search and give them a call. You want to limit your inquiries to avoid negative impact on your credit history.
- Inquire if there are any promotional incentives with a balance transfer. Make sure you know all fees associated with the transfer before making a decision and when the promotional rate expires.
- Do your best to remove credit card debt as soon as possible. Work an extra job, sell some stuff, and get it paid down so you’re not losing your money on interest payments.
- Always pay for basic needs first before paying credit card payments. Prioritize food, housing, transportation and basic clothing before everything else.
- However, notify and inform your credit card company that you’re having a hard time making the payments.
- Run towards your creditors, not away from them. Over-communicate when you’re not able to make minimum payments.
2. Should I “cash out” or “rollover” my 401(k)?
- You can cash out and pay:
- 10% penalty if under 59½ (with a few minor exceptions).
- Federal & State income tax - 20% or higher.
- You can leave it there
- Set it and forget it…
- Make sure your fees aren't high.
- Make sure your investment options are good.
- Personally, I recommend you not leave it with your old employer...direct transfer it to an IRA (Independent Retirement Arrangement).
- Direct Transfer (direct rollover) to a new plan?
- If it’s not “direct” then the employer holds onto 20% of the cash and you could get penalized and have to pay taxes and fees on that amount.
- You can do a direct transfer to your new employer, but only if they have great options and low fees. If not, I recommend you find a brokerage you trust (Vanguard, Fidelity, Charles Schwab, T. Rowe Price, T.D. Ameritrade).
3. My parents are financially irresponsible; how can I help them?
- First, please remember no matter how irresponsible your parents may be with money, they are your parents, so honor them by being kind as you discuss this topic with them.
- It’s may difficult, but if they don’t want to take your advice they don’t have to, so don’t get offended. They are adults and they should make their own financial decisions.
- If their financial irresponsibility causes you or the family financial hardships you may need to get a bit more forceful.
- Be aware that until a person has been told by a court that they lack the capability to manage their own finances, they are allowed to continue making their own financial decisions, even if their behavior is financially damaging to them – taking out loans, revolving credit, mortgages, and so on.
- If your parents agree, you could get them to sign a power of attorney and work out an arrangement to let you or someone else manage their money.
- If they don’t agree, unless there’s mental infirmity or some other incapacity, your option for guardianship is going to be difficult to get. There are many requirements to guardianship, so if you do decide that’s a viable option get an attorney to help you through the process.
- Approach this situation with wisdom. The relationship is worth more than fixing the financial mess.