Question: Over the last few months, I have canceled all my credit cards that had interest rates higher than 14%. Most companies have been cooperative, with the usual letter "hoping that I will reconsider in the future."
However, two companies have refused to cancel accounts after three written notices. Both offered, over the phone, to reduce the interest rate, but in the written material I receive the interest rate is above 16%. I have tried to locate an agency to take my complaint without success. Any suggestions?
Answer: The Federal Trade Commission is the agency you're looking for, but you may not need its intervention.
First, make sure you actually have a problem by ordering your credit report from one of the major credit bureaus--Experian at (800) 311-4769, Equifax at (800) 685-1111 or Trans Union at (800) 916-8800--to arrange to have a copy of your report mailed to you for a small fee. You also can visit the bureaus' Web sites to purchase a report online at http://www.experian.com, http://www.equifax.com or http://www.transunion.com.
The report will show credit accounts that have been opened in your name and also should include notations showing which are active and which have been closed. (Note that even if you cancel a credit card, the closed account may continue to be reported in your credit history for several years.)
It's entirely possible that the companies honored your request to cancel the accounts but are simply continuing their marketing efforts, said Maxine Sweet, Experian spokeswoman. If your balances are zero--in other words, if you don't owe them any more money--and you made your request in writing, your request to cancel the cards should be honored by the companies.
If the accounts are still shown as active, you can ask the credit bureau to investigate and add the notation "closed at consumer request" to the accounts, Sweet said.
That's likely to take care of the problem. You can always complain to the FTC or your state's attorney general, but these regulators tend to act only after receiving a number of complaints showing a pattern of problems.
By the way, it's smart to avoid high-rate credit cards, but closing several credit cards at once can do your credit standing more harm than good. Abruptly shutting off lines of credit can make whatever balances you do carry look bigger because lenders judge credit-worthiness in part by the distance between the debts you owe and the credit available to you. Generally, the bigger the gap between your balances and your credit limits, the better.
You also can harm your credit score by closing an older account because such a move can make it look as if you have a shorter credit history than you actually do.
The key is to apply for credit sparingly--only as you really need it--and to close accounts the same way. But keep up the good work of reading the fine print; your vigilance apparently saved you from a nasty bait-and-switch on interest rates.
Marriage Has Its Tax Benefits Too
Question: My wife and I are thoroughly disgusted by the lack of substantial "marriage penalty" relief in the new tax cut legislation. We feel that a drastic measure is warranted. What is the cheapest, easiest way for a couple with no kids and no substantial assets to get a "paper divorce" that will stand up to Internal Revenue Service scrutiny? We plan to go on living together as common-law spouses instead of "please take our money" marrieds.
Answer: Rather than divorce, perhaps one of you could quit your current job and start flipping burgers, as the hero did in the movie "American Beauty." After all, married people with disparate incomes typically get a marriage "bonus": They actually pay less in taxes than they would if the high earner and the low earner simply lived together. In fact, more couples in the U.S. receive a marriage bonus than pay a marriage penalty.
Or maybe you think a career at Burger King is too extreme a move just to save on taxes? In that case, you might want to rethink your plan for a "paper divorce."
Married people have numerous other legal and tax advantages, including favorable inheritance rights and tax-free employment benefits for spouses. That's why gay people want to get married and have their unions legally recognized.
By the way, common-law marriages aren't recognized in most states, including California.
Liz Pulliam Weston is a personal finance writer for The Times and a graduate of the personal financial planning certificate program at UC Irvine. Questions can be sent to her at money email@example.com or mailed to her in care of Money Talk, Business Section, Los Angeles Times, 202 W. 1st St., Los Angeles, CA 90012. She regrets that she cannot respond personally to queries. For past Money Talk questions and answers, visit The Times' Web site at http://www.latimes.com/moneytalk.