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Canceling Credit Cards The Right Way

Canceling unused credit cards is an excellent idea, but keep a few things in mind to do it right.

Keep an account open, and don't let the card issuer know you're thinking of canceling until the balance is paid off. Some issuers may increase the interest rate if you try to cancel while you still have a balance.

If you cancel your credit card over the phone, know that your card issuer may transfer you to someone who will try to convince you to keep the card. Also, make sure you receive written notification from the card issuer of your cancellation and write down the day, time, and who you spoke with for your records. Ask the card issuer to report that the account was "closed at customer' request."

If the card issuer offers you a better rate or an improved deal on a card you're trying to cancel, get all the details; consider keeping it and possibly canceling another card instead.

If you have balances on several cards, consider consolidating those balances on one or two low-rate cards and cancel the rest.

Paper or Plastic

Not the bag, your payment.

Why not try plastic? A credit Union debit card works just like cash at any retail outlet with a point-of-sale scanner, enter your personal identification number, and make the payment directly from your share draft account. No fumbling for a pen or identification. No worrying about lost or stolen cash. You get a receipt from the store and a copy of your account transaction for east record keeping.

Stop in to request your debit card. Maybe plastic is the answer.

True or False: It's Always Smart to Prepay Your Mortgage

Mortgage prepayment promises to make the day you've paid off the debt on your home arrive sooner rather than later. You can prepay by adding a little extra to your regular monthly payment; by making one extra payment a year; or by making half a monthly payment every two weeks, which equals one extra full payment each year.

Prepaying can pare years off your mortgage and reduce your total interest. For example, paying $25 extra each month on a fixed-rate, 30-year, $100,000 mortgage at 7% interest saves $18,214 in total interest and reduces the term by more than three years.

Before you get carried away, determine if prepaying is right for you:

Never prepay if you have consumer debt. "Consumer debt should always be the first thing you pay off," says Phil Storms, a Denver certified financial planner. "I've seen people with $30,000 of credit card debt who were happy because they were down to $15,000 on their mortgage."

Make sure to save for other financial goals. People end up house-poor if they've paid off their house, but have not saved for retirement or their children's college education.

Weigh your liquidity needs. Prepaying your mortgage could make you strapped for cash to cover regular bills or emergency expenses. Build a cash reserve equal to at least a few months' salary--more if your job future is unpredictable.

Examine the tax consequences. You may consider prepaying during the peak earning ages of 40 through 60. But because this also is the time you're in your highest tax bracket, you would eliminate your largest tax deduction by prepaying your mortgage.

If you have all these factors under control, prepaying may be a good move. To prepay the right way:

Tell your lender to apply any extra amount to the principal.

Check if there's a prepayment penalty--these are rare, especially at credit unions.

Avoid companies that offer to set up a prepayment plan for you--for a price.

Create your own prepayment plan. If you need help, consult the Credit Union or your mortgage lender.

Blending Marriage and Money

Half of all marriages in the U.S. end in divorce, often because of money. The success or failure of a marriage can depend on how well a couple handles money. A couple's first experience handling money may be the decision to open a joint share draft/checking account, maintain separate accounts, or--a combination of the two--a joint and individual accounts.

Don't make the decision lightly and, according to financial planners, don't make it quickly, either. It's better to "ease" into financial blending. A lot of people get married and the next day put everything into a joint account. Slow down, experts advise, and maintain separate accounts for a while or try a joint account while keeping separate accounts as well. Joint accounts provide a sense of teamwork, but they can allow one person to be in charge while the other remains "in the dark." This can create tension and lack of communication in a marriage.

Separate accounts help maintain each partner's identity and provide the financial knowledge necessary in case of a divorce or the death of a spouse. As your needs and goals change, or if there's constant tension over money, consider combining or separating your accounts. For information about your options, ask the financial professionals at Credit Union.

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