MAXIMUM STRUGGLE WITH MINIMUM PAYMENTS GOING UP, CONSUMERS LOOK FOR WAYS TO PAY OFF CREDIT CARDS.

Byline: Evan Pondel Staff Writer

Louise Clinton smelled great, but her financial savvy stank.

Every spritz of Dolce & Gabbana perfume cost Clinton several dollars more than it should because she paid for the luxury Italian scent on her credit card.

As the designer perfume bills added up, the double-digit interest rates took their toll. Eventually, the mother of two from Toluca Lake had to say arrivederci to her beloved D&G mist.

``That's why I'm cash-only this holiday season,'' Clinton said. ``So what if I have to go downtown and buy some imitation perfume that smells just as good? I don't want to have to pay the minimum on my credit card again.''

Consumer credit watchers say the recent federal mandate requiring credit card companies to raise minimum payments should cause shoppers to think twice about whipping out the plastic this holiday season.

While it's designed to protect consumers in the long run by forcing them to pay off more principal and thereby cut interest payments, consumers will pay more in the short term. Some credit watchers are expecting minimum payments to double or even quadruple.

``This is not the holiday to be reaching for cards. And I'm not talking greeting cards,'' said Catherine Williams, vice president of financial literacy for Money Management International in Chicago.

Instead, Williams recommends contacting your creditor immediately. Few consumers realize that creditors are often willing to negotiate to keep the customer happy, she said. But the notion of facing your debt woes is often more difficult than calling a creditor.

More than 16 percent of U.S. homeowners' personal income was used to pay off debt and other financial obligations in the second quarter of 2005, according to the Federal Reserve Board. That figure has remained relatively consistent in the past decade.

And that's among the reasons why the federal government prompted credit card companies to raise rates on minimum payments, said Kevin Mukri, spokesman for the Comptroller of the Currency Administrator of the National Banks.

In 2003, the Comptroller issued a mandate that would not only help consumers chip away at their credit card debt, but also make the creditors more liquid. ``Regulators didn't feel the negative amortization was in their (the consumer and creditor's) best interest,'' said Mukri, who also noted that most, if not all, major creditors will raise their minimum payments by 2006.

But some credit counselors argue that the increase will push consumers over the edge. Should that happen, consumers may be faced with second mortgages and other investment vehicles that essentially augment debt.

``All of a sudden, making that minimum payment becomes a dangerous thing,'' said David Jones, president of the Association of Independent Consumer Credit Counseling Agencies.

To counter such a scenario, Jones suggests rebudgeting and figuring out a way to handle the minimum payment. For some, that's as simple as not purchasing a cup of coffee on a daily basis. For others, it will require a sit-down with a credit counselor. ``And the counseling should initially be free. If an agency wants to charge you right off the bat, run for the hills,'' Jones said.

Sirin Boonyaratsuntron, 27, chose a different route. The interest rate on her credit card was almost 25 percent when she decided to do something about it.

She signed up for a zero-percent interest rate credit card and transferred over all the debt. After repeating the process several times, she eventually dug herself out of several thousand dollars worth of debt.

``Now I only pay with cash,'' said Boonyaratsuntron, an assistant manager at Westfield Fashion Square in Sherman Oaks.

Another method is debt consolidation. The process involves consolidating all credit cards to one, and then focusing on that account until the debt dissolves.

That's how Bill Wong deals with debt. The manager at Consumer Counseling Services in Long Beach said he expects an increase in business this winter after new regulations governing bankruptcy protection went into effect last month. The law sets new limits on personal bankruptcy filings and requires debtors to get professional credit counseling advice before they file petitions.

``Oh, we're going to be very busy in the next month,'' said Wong, who often works with people at least 30 to 40 payments away from paying off their debt. ``And once we consolidate, they cannot use their credit cards anymore.''

Even though consolidation and zero percent interest rates can help those with debt woes, others believe such options are mere patches on a tire.

At least, that's Robert Becerra's perspective. For a more permanent game plan, the enrolled agent at Triple I Concepts in San Bernardino said it's worth taking a look at tax withholdings.

For example, instead of anticipating a large tax refund at the end of the year, ``try to figure out a way you can break even,'' Becerra said. ``Then you'll have more money throughout the year to pay off your credit card debt.''

But if tax preparation isn't financially convenient, Becerra and other credit counselors offer the following advice:

--Revisit cellular phone and cable contracts. Many cellular phone and cable companies offer competitive rates, and therefore it could be time to sign up with a new provider.

--Pay a credit card bill before the due date. The earlier you pay the bill, the less likely you'll have to endure steep interest rates. You may even consider making two payments during the billing period.

--Lock in fixed-rate loans when applicable as opposed to adjustable. The better the consumer can anticipate the payment of a bill, the more financially organized the consumer.

Evan Pondel, [phone]

evan.pondel(at)dailynews.com

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