Credit Card Minimum Payments to Double - KCBD NewsChannel 11 Lubbock

5/6/05

Credit Card Minimum Payments to Double

If you haven't already cut up your credit cards, this may drive you to: Crystal Gomoke with Consumer Credit Counseling Service says, "The Office of the Comptroller of the Currency has asked credit card companies to increase the minimum monthly payment they are requiring consumers to pay from 2% of the balance each month to 4% of the balance."

Gomoke says the average consumer has $10,000 in credit card debt, which means they pay $200 minimum and, with this increase, they'll pay $400. Consumer Barbara Huffhines says, "That would be tragic, but I hate to think I'd let it get that bad. That would be real bad for someone like that." Consumers realize the change will be tough for some, but effective too. Rachel Lehman says, "Probably a good idea because it'll help people get out of debt sooner." Gomoke wants everyone to be forewarned, "Thanks to this story, you're going to know it's coming. It's not going to be a surprise, so you have time right now to make adjustments in your budget."

The reason the government has pushed for this change is simple. A quarter of all credit card holders pay only the minimum monthly payment each month. Gomoke explains, "If you pay only the minimum payment on credit cards each month, you'll be paying on them for an average of 30 years. This is trying to get it down to a point where you will pay off debt in a reasonable period of time, closer to 10 to 12 years."

In the end, if doubled credit card payments would put you over the financial edge, remember -come October- filing for bankruptcy will be a lot harder. Gomoke says, "The price to declare bankruptcy will be increasing , the paperwork will be increasing." And the difficulty of getting approved will be increasing as well.

If increased credit card payments will make you late on any other payments such as student loans or mortgage payments beware: the credit card company can raise your interest rate up to 29.99%.

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Consumer Credit Counseling Service tips to help prepare for larger minimum credit card payments:

  • If you got a large tax return this year, make adjustments to your W-4 so you have more disposable income.
  • Start tracking your expenses.  Write down everything you spend money on… from your mortgage payment to a softdrink.  This way you’ll know where your money is going each month and where you can make changes.
  • Take extra credit cards out of your wallet or purse.  Carry only one card for emergencies.  If you see something on sale, you’ll have to go home and get the extra card.  That will give you extra time to think about the purchase and decide if it’s a “need” or a “want.”
  • If you’re at a point where your budget simply cannot handle an increase in credit card payments, seek professional credit counseling.
  • To calculate how long it will take to pay off your credit cards paying only the minimum monthly payment, (click here) for a link to bankrate.com’s calculator.
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