A Misguided Stand

I came across this article today in the Huffington Post.   In it, the author describes a woman, Ann Minch, who has posted a video on YouTube in which she is refusing to pay her credit card bill with Bank of America.     She cites the fact that they have raised her interest rates unreasonably and the fact that they are one of the recipients of the federal bank bailouts.

What I Like About This

She is appealing to the executives of the company after she made an attempt to negotiate her rate down.    This is somewhat like the strategy that I recently wrote about in regards to an issue that I had with Delta Airlines.     If you feel you are being mistreated by a company, and you have exhausted the normal channels, then this kind of appeal can work.

I also like that she has removed her savings account from the bank, taking her business elsewhere.    Like voting, one person’s actions are insignificant, while many people acting as a group can cause rapid changes.

What I Don’t Like About This

Where to begin!?    For one, carrying credit card debt is the worst possible way to manage your money short of payday loans and loan sharks (is there a difference?).    Getting past that, it struck me that she had removed approximately $5,000 from a savings account in protest of her interest rate on her $5,943.34 balance.     So she is within a $1,000 of being able to pay off her balance completely.    Paying off her balance and canceling her card would be the smartest move.

If she cannot bridge the gap between her savings and her credit card debt, there are two other options she could choose.    The easiest would be to pay off most of her debt, and finish off the rest as soon as possible.

She could also do a balance transfer to another card with a lower interest rate, preferably a 0% introductory rate.   Unfortunately, she will still accrue a balance transfer fee, typically 3%.     She could also do both, pay off most of her debt, and transfer a small fraction to another card.

Admittedly, without a job she might have trouble getting another card, but lets see where her “strategy” of default is going to lead.

Misguided Populism

Perhaps the worst thing about her video is the fact that she does not intend to pay off her balance at all and she is encouraging others to take the same irresponsible path.    For a reality check, here is what will happen.    First, she will ruin her credit.    That will make a balance transfer to another card impossible.    It will also have plenty of other consequences.     She will not be able to qualify for a mortgage, a refinance, or a home equity loan.     She may see higher insurance rates.     She is currently an unemployed mental health case manager.  When she looks for a new job, they may do a background check and discover her poor credit.     Since she is works in health care, that is a very real possibility.   I don’t agree with this practice, but it is a reality.

From there, this only gets worse.   Depending on what state you are in, the company can take you to court, seize your assets, and garnish your wages.   Her anger at her credit card company or their  government bailout will have zero influence on the judge.    She may also be liable for court costs and legal fees on top of her ever growing principal, interest, and penalties.

By far the worst thing about this video is that she is encouraging others to follow her off of a financial cliff.    Even if you agree with your politics, this is the financial equivalent of a cult leader ordering a mass suicide.

My Advice

She got herself into debt.    It is unfortunate that she lost her job, and it is not fair that the bank is raising her rates, but default is not the answer.   This is like the car chases on TV where the suspect gets pulled over for speeding, and then ultimately spends years in jail(or worse) for leading the police on a high speed chase.   She may get her 5 minutes of fame, but she will lose in the end.

As I have shown, appealing to executives and publicizing your cause can be a great strategy for getting a company to do the right thing.    Acting in an irresponsible and financially self destructive way is a terrible strategy.  Encouraging others to follow her is morally wrong.  The bank will survive her default, but she will be financially ruined.

She should continue her appeals to the executives and put whatever pressure she can on them.    Alert elected officials and the news media as well.   At the same time, it is vital that she continue to pay her bills and maintain her credit.    She should also recant her calls for others to default.