Credit 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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