Credit Card Minimum Payments

Are Minimum Payments Going To Double?

Major credit card lenders are starting to double the monthly minimum payment they charge on the balances you carry, from 2% to 4% of your current balance. While this will be bad news to some, most of us should welcome this trend. It will cut years off the repayment period and save thousands in interest.

Consumer groups have been urging the government for years to make it mandatory for credit card companies to place somewhere on your monthly bill a statement that notified customers how many years it would take to pay off their debt, making only the minimum payment.

As part of bankruptcy reform, this is to become a reality. I guess the lenders were worried about the backlash they would face once their customers learned that their $1000 sofa would not be paid off for almost 30 years and the interest would be more than the original purchase.

For those of us who can afford it, this is something to praise since it will significantly cut the cost of the debt of those who are only make minimum payments.

A Way to Try to Avoid Payment Increases

If you don't want to get stuck with these new terms, check every piece of mail you get from your lenders very carefully. If they send you a notice changing the terms of your agreement, read it carefully. See what you have to do to avoid the change.

This usually means having to send a written notice to a specified address by a certain date, telling the bank you do not agree to the amendments and to close your account.

Make sure not to use the card again, especially after the cut-off date. If you do, you will be stuck with the new terms whether you like it or not.

Make sure to cancel any automatic charges, even those made by the bank itself, separately and before the cut-off date. Credit insurance or some other similar charge will stick you with the new repayment terms.

If you do this correctly, you should be able to repay according to your current agreement, not that this is necessarily to your best benefit.

This change is going to create untold hardships for those already on the edge – those who can barely make the current minimums now. They face some very unappetizing choices. They can work more hours, cut all spending to the bone and hope to get by.

Or they can file for bankruptcy. The new bankruptcy law will take effect sometime in October, so if bankruptcy is your only option, this is the time to file. (Bankruptcy reform has not really changed things for most debtors.)

Apparently banks are aware that there will be major repercussions caused by this move and have raised reserves to cover anticipated losses.

However, banks may also be more willing to work with you to create repayment terms you can afford. They may cut interest or lower your monthly payments, at least temporarily. They know they will lose everything if you go bankrupt, so if you’re in too deep, this might be the time to talk to your lenders and see what you can work out.

So be prepared to be shocked.

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