Smart Money: Shopping for lowest credit-card rate prudent

Bruce Williams is a national radio talk show host and syndicated columnist.

Dear Bruce: How do you find low credit-card interest that lasts more than six months? I have one that's 5.9 percent interest, which ends this month and my balance is around $4,000. I need to find a new card to transfer it to. P.M., Cincinnati, Ohio

Dear P.M.: You are "cherry picking," and I applaud that. They are offering you these low-interest rates to get your business. They aren't making any money at those low rates. To keep these "introductory rates" you are going to hop from flower to flower every six months to a year. Whether this is worth it is another matter. You mentioned that your balance is about $4,000. If you are saving 6 percent a year, then you are saving $240 a year by making these changes. You might want to put a similar amount of effort into paying off the balance and having no interest to pay at all.

Dear Bruce: How do I pay off a bank loan fast? What's the formula? Someone said to send one check for payment and one check for the principal. What do you tell the bank? I've heard that banks don't like it when you do this. Can you help me? R.D., via e-mail

Dear R.D.: You didn't say what kind of loan we are talking about, whether there is a prepayment penalty, etc. In general, you've got it right. On a mortgage loan for example, you can send one check as your regular payment and a second check that is clearly marked for reduction of principal. Do not send a larger check or two or three payments at a time, because very likely they will just credit it as payments in advance and not reduce the principal. Whether banks like this is irrelevant; it's what your contract allows you to do.

Dear Bruce: You recently recommended that a reader purchase short-term corporate bonds. How do you go about purchasing these bonds? H.M., via e-mail

Dear H.M.: Any full-service or discount broker can tell you what is available in the marketplace, coupon values, redeemable features, etc. If you are a complete novice in this area, I suggest that you use a full-service broker to advise you and execute the transaction for you, otherwise you can hit serious trouble.

Dear Bruce: I was in debt up to my eyes. I saw a television commercial for a company that used illustrations for people that had similar problems and now they were free and clear. They had their obligations removed and interests reduced, etc. I paid some up-front fees to get these miracles performed. I just read in my local newspaper that the company has stopped taking new clients and although it denies any wrongdoing, is being sued by a federal agency. Meanwhile, I am even deeper in debt than I was before. What recourse do I have? L.T., Sheboygan, Wis.

Dear L.T.: I don't know what, if any, recourse there will be should this company be found guilty of wrongdoing. An accusation is not guilt. They have agreed not to take on any new clients. The reality is that there are no easy, painless ways to reduce debts. When you ask a creditor to change the terms of the deal, this has to be damaging to your reputation. There are legitimate companies in the credit-counseling enterprise. Debt reduction requires sacrifice and pain. Anyone that tells you any differently is blowing smoke in your face.

Dear Bruce: For the last four years I have purchased a $100 face-value Series E Bond a month. I want to give them to my daughter when she gets married. They earn very low interest. If I were to cash them in, I would get approximately $5,000. Is that wise to do and then invest it elsewhere, or let the bonds mature? B.L. Lafayette, La.

Dear B.L.: Saving Series E Bonds are a lousy investment right now. The interest they pay is simply not competitive with the rest of the world. If you can make a small risk, consider investing in an aggressive mutual fund or a strong equity. There is a small chance that you may lose some of your investment. Given the very small amount of interest you are currently earning, this would be the prudent thing to do.