Credit Card Minimum
Monthly Payments Double Due to New Rules
January 3rd
2006
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Changes in Rules |
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This may not be the best time to require credit card companies to double
their minimum payments. There are numerous stories of cash strapped
families now hamstrung with debt barely able to make their minimum
payments. Starting this month the minimum payments required by credit
card companies will double.
Most credit card companies would require minimum payments of just 2% of
the principle. Now over their own objections, they are required to
raise that minimum payment to 4%.
That is right; the credit card companies did not want this new
regulation. They would make more money if the minimums were set at 2%,
not 4%. Some credit card companies have already raised their minimums
but this month the rest will be required to follow suit.
These guidelines have been issued by the Federal Reserve, the Office of
the Comptroller of the Currency (OCC) and other federal regulators.
Combine this with the new bankruptcy laws passed last year by congress,
consumers may experience some major problems.
Credit cards are commonly used to pay off major medical bills or start a
business. These types of expenditures can cause credit card balances to
skyrocket. Some 40% of households have a balance on their credit card
from month to month averaging $10,000.
There are some things you need to be careful of when you consolidate
your credit card debt. For instance, companies may charge more than one
interest rate on the balance. They may have a lower rate for balance
transfers.
Let’s say you transfer $10,000 onto a promotional card and then charge a
set of tires for $800 on that same card. The bank may have a promotional
rate of 2% on the balance transfer but charge a 10% rate on all other
charges. Now when you make your monthly payment the bank will apply it
to the lower interest rate portion of your balance. When you transfer
money you should consider using another card for your purchases and hide
the transfer card so you don’t accidentally use it.
There are credit counseling services available. Basically they can help
you consolidate your debt into one payment, and possibly help you lower
your interest rates. Also, keep an eye on the banks. Some may charge
the wrong promotional rate. Always check your statement!
By
Dan Wilson
Best Syndication Staff Writer
Books Concerning Credit
Keywords and misspellings: credit card
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