Q: My 81-year-old mother has trouble saying no to any of her six children; after taking out cash advances on her credit cards so she could loan money to my siblings, she's out $8,000. I explained compound interest to Mom, who now understands that she'll never be able to repay her debt. She lives on $600 a month from Social Security, and several of my brothers and sisters help her out, but the ones who borrowed from her aren't willing to step up. I suggested that Mom stop paying and let me talk to the bank about a settlement. Can you advise me on how to proceed? I don't think my mother can keep laying out money for much longer, although she says she will do so until she dies.
A: As daunting as an $8,000 debt looks, I'm relieved the figure isn't higher, given your mother's generous nature. A cash advance on a credit card is one of the worst types of borrowing because the interest rate is typically 21 percent or more. It's fruitless to try to talk your way out of this; the card issuer has every right to expect repayment.
I want your mom to keep paying at least the minimum due (about $240) on the monthly credit card bill. On-time installments are vital for protecting her FICO credit rating. That's important because if her score is at least 700, she has a good chance of being able to transfer the entire balance to a new card with a lower interest rate. Many card issuers offer zero percent interest for the first year when you move your balance to their card. At CardTrak.com, click on Search Cards, then choose the Balance Transfer Cards link to find issuers offering the best deals. But only sign up for one card—multiple applications made at the same time can actually hurt her credit score.
Next, it's time for the kids to take care of Mom for a change. If every sibling can pony up $50 a month, that will add $300 to the $200 or so she can contribute. If you stay committed to pooling that $500 every month, your mother's debt will be gone in less than two years.
I know you've tried to enlist your brothers and sisters before without much luck. Try once more. As I explain in Family Matters , you should convene a meeting of your relatives. Bring a written proposal of what everyone needs to do to help your mother eliminate her debt. Mom has to be at this meeting too. The siblings who have found it easy to say no to your entreaties may find it harder to confirm their selfishness in her presence.