Card Minimum Payment Increase
In 2009, major credit card companies doubled the monthly minimum payment required of cardholders.
From an average of 2.5%, the credit card minimum payment increase reached 5%, which is definitely
large especially to consumers who can only afford to try to keep current with their balances by paying the minimum
payment every month. Unfortunately, this is not against the law. Most credit card agreements and disclosures do
allow banks to do this with prior notice.
Though this sounds like way too much burden to handle, credit card minimum payment increase may be a better option
for consumers. As recent studies showed, paying only 2% to 3% of the current balance has encouraged credit card
users to spend more than their means. People seemed to have thought that a revolving debt is okay and that carrying
a balance is a normal thing so long as minimum payment is paid. Because of this, legislators tried to persuade
credit card minimum payment increase from card issuers. They say that this increase will reduce the maximum time it
takes to pay off the entire balance of a credit card, and in effect, the interest it will rack up. Research showed
that consumers who paid just the minimum amount ended up paying twice as much as the original cost of their
purchases. This makes credit card minimum payment increase seem like a good idea. In fact, the latest federal law
requires credit card companies to send a notice 45 days prior to making any credit card minimum payment increase or
any form of interest or rate hike. Another rule that is bound to take effect by July 2010 states that card issuers
are now required to notify their consumers of the dire consequences of paying just by the minimum amount. Card
issuers will also be required to give examples of the period it will take to pay off a balance and the total amount
the consumer will shed when s/he only pays the minimum requirement.
When seeing it from a long-term perspective, credit card minimum payment increase does seem like good idea since it
slashes the total amount and makes paying faster. However, for people who have transferred huge balances or are
currently low on their incomes, credit card minimum payment increase is not good news. What they are advised to do
is to contact their card issuer for alternatives that they may take in order to keep their balances current and
their credit rating intact. Most companies agree to discontinuing the credit card minimum payment increase
but with the consequence of having a higher interest rate. Which is the best choice for you? You decide.
Source: Credit Cards For People With Bad Credit Rating
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