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Regulations making Credit Card Payments to Double

July 5th 2005

Credit card payments to double

Credit card minimum payment amounts are going to double.  Federal regulators are forcing the credit card customers to pay off more than just interest payments.  The banks are going to be forced to increase the minimum monthly payment from 2 percent to 4 percent.  MBNA, Citibank, and Bank of America have already announced that they are increasing the minimum monthly payments.  More will be following suit to comply with the regulations.

The national average credit card debt per household is approximately $10,000.  About 40 percent of American households have a balance on their credit cards from month to month.  If a persons minimum payment was $200 per month it would be $400 per month due to the new regulation.   

Wells Fargo for instance has implemented a plan that makes at least 1 percent of principle due per month.  The change for new accounts has already started back on June 3rd.  The current customers will receive notices in the billing statement this fall and the changes will go into effect on Jan 1st 2006.

 

This could be a detriment to a large number of Americans with credit card debt.   Some people will not be able to make the minimum payments.   Some will be pushed to bankruptcy faster than before.  Others may gain a benefit of the push to eliminate their credit card debts sooner than later. 

Banks have been worried about the negative impact this change will have on their business.  The rules were originally published in January of 2003.  At that time the banks persuaded the US comptroller of the Currency (OCC) to give a transition period for the change.  The regulators may lose their patience as compliance is now being expected.

What can the consumer do to patch up there financial situation?  Budget all of your expenses.  By keeping a spending diary, you will be able to see where the money is spent and be able to cut out the perks that you donít need.  Do not bring your credit cards out for shopping, leave them at home.   Changing your spending habits and set boundaries by paying with a fixed cash budget.  This will help you from creating new debt.  Some may want to cut out the satellite/cable TV service, discontinue the cell phone service, donít eat out at restaurants, and substitute your meals at home for economy budget meals.  Check with the utilities for low-income programs if you have a limited income.  Refinancing the house may help alleviate the debt, however, it does not fix the financial problem which originally created the debt.  Addressing the root of what caused the debt and changing spending habits would be more effective.  Another solution is to talk with consumer credit counseling services that offer debt-management programs.

Making a plan to accommodate this change is the best solution; however it is very unlikely that Americans will embrace this and comply.  There is likely going to be an acceleration of bankruptcy for many of these Americans that carry credit card balances.    

Emergency Cash


By Nicole Wilson
Best Syndication Staff Writer

 

Keywords and misspellings:  creditcard paymints debt det bankrupty bankrupcy bankruptsy

 

 


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Copyright 2005 Best Syndication                                            Last Updated Sunday, July 11, 2010 01:18 AM