Dear Liz: We're having trouble with a gym that won't stop charging our credit card. My husband has contacted them multiple times about canceling our membership, but the charges just keep coming. The contract we signed is really confusing, but it clearly states the gym can take 10 payments from our card. They have now taken 13 payments from our card. I just don't know what to do to stop them.
Answer: Some gyms make their money by providing workout facilities. Others make their money by signing people up for contracts, then continuing to charge credit cards or bank accounts even after those people cancel.
This isn't a mistake or an isolated incident. This is the gym's business model, and it will continue to charge you until you push back — hard.
Don't make any more phone calls that will just be ignored. Start by sending a letter to the gym by certified mail, return receipt requested, repeating that you want your membership canceled. Keep a copy of this letter and the green receipt you get back in the mail as proof that you provided proper notice. If the gym requires that you give 30 days' notice, and many do, you may have to pay one more month's charge.
If the gym charges your card after that, however, contact your credit card company and send it the proof that you canceled your membership. You also should contact your local Better Business Bureau and your state attorney general to file complaints about this gym.
In the future, avoid gyms that push contracts. Instead, look for one that allows you to pay on a month-by-month basis. Many communities have nonprofit YMCAs or similar organizations that provide workout facilities at reasonable cost — no contract required.
Withdrawing funds from a 401(k) account
Dear Liz: I retired two years ago at 60 and draw $5,525 a month from two pensions, which covers our necessary expenses. What it doesn't cover is travel, which we enjoy. To pay for our trips, I've been withdrawing $10,000 a year from my 401(k). So far, the account has grown enough to offset these withdrawals. I'd like to wait to start claiming Social Security, since I know that will increase my benefit. Should I continue my annual withdrawal from my 401(k) for the next couple of years and not start Social Security, or apply for Social Security and not touch the 401(k) so it can keep growing?
Answer: You've been lucky the last two years, but your luck may soon run out.
Favorable market conditions allowed your 401(k) to make up for your withdrawals, but there's no guarantee that will continue. Bad markets dramatically increase the chances that a retiree will run out of money, since withdrawals are being made from a shrinking account. The money taken out isn't there to benefit from the inevitable rebound.
That doesn't necessarily mean your withdrawals, or your travel, has to stop. But you need to have a better handle on how much you can withdraw each year without running a big risk of running out of money. You can get a rough idea by using mutual fund company T. Rowe Price's retirement income calculator at http://www.troweprice.com/ric. For the best results, however, you should hire a fee-only financial planner to review your situation and make suggestions about how to make your money last.
Business accounts may show up on personal credit reports
Dear Liz: When credit scores are determined, do the formulas consider business credit cards or just personal cards? If I'm carrying balances on both types of cards, does it matter which I pay off first if I'm concerned about my scores?
Answer: If your business cards show up on your personal credit reports, and they often do, those accounts are used to help calculate your credit scores.
You can see what accounts appear on your reports by using http://www.annualcreditreport.com, the only site that offers your federally mandated annual free look at your credit files.
The FICO scoring formula, which creates the numbers used by most lenders, doesn't distinguish between business and personal accounts. If you're carrying debt on both types of cards at similar interest rates, you should pay down the account that's closest to its limit if you want the best chance of improving your scores.
Liz Weston is the author of "The 10 Commandments of Money: Survive and Thrive in the New Economy." Questions for possible inclusion in her column may be sent to 3940 Laurel Canyon, No. 238, Studio City, CA 91604 or via asklizweston.com. Distributed by No More Red Inc.