Posted on 02/01/2006 1:08:55 PM PST by ex-Texan
The big players have raised minimum payments from 2% to 4% of your balance, meaning you'll get out of debt much quicker. Here's how to cope until that day.
Good news: Credit card companies are doubling their minimum payments.
Bad news: Credit card companies are doubling their minimum payments.
Huh?
So far, MBNA, Citibank and Bank of America have announced they are doubling minimum monthly payments on credit card balances from 2% to 4%. Others are expected to follow suit quickly. To some cardholders, that could be seen as a good thing. To others it could be devastating.
If you can handle the increased payment it's good. Let's face it, if you pay only a 2% minimum each month, your debt would probably last longer than most marriages. Doubling your minimum might put you back on the financial straight and narrow. Ostensibly designed to help consumers get out of debt faster, the increased minimums will force cardholders to pay off fees, interest and at least a portion of the principal each month.
Why it's happening Over the past few years, low minimum payback rates of between 2 and 2.5% have encouraged Americans to spend, spend, spend -- and to rack up an average credit card debt of close to $10,000 per household. For the estimated 40% of cardholders who carry a balance from month to month, the low minimums free up cash. But paying off a big charge little by ever-so-little also means that a $1,000 debt can turn into a 22-year commitment -- and that you'll accumulate thousands more in interest in the meantime.
(Excerpt) Read more at moneycentral.msn.com ...
Why anyone would convert unsecured debt into secured debt (aside from creditors) is beyond me.
Credit card payment = full balance due.
Full balance due < 10% of money in checking account.
I recommend these formulas.
Call your credit card company and ask them to lower your interest rate; if you've made your payments on time, many of them will. I did. It's amazing how many folks never even think of doing that.
Two points.
1. People who can only afford the minimum payment on credit card debt should not have credit cards. Like giving whiskey and car keys to a teenage boy.
2. Taking unsecured credit card debt and transforming it into secured debt against the equity (real or illusory) in one's house seems very foolish. Hounding collection agency calls about unpaid credit card bills is different than foreclosure on a mortgage that cannot be paid.
May I suggest that someone who can't meet 4% of their debt in any given month is pretty much screwed? That's only $4 per $100, $40 per $1000.
I'm trying to pay my cards off. However, in the meanwhile, I'm suffering.
I'm looking forward to the day when mine is paid off. As soon as it is, I'm not doing business with them again, even if they pay ME interest on my balance. I'm paying damn near 30% because of a late payment a couple of years back. Ridiculous.
This is disinformation and has been covered many times on FR. I have accounts with all those issuers and the minimum payments didn't double; most went up very modestly if at all. My new minimum payments tend to be about 1.5% of the balance. Only high-interest rate balances minimum payments are anything like 4%.
I can't believe how many people don't grasp this. Maybe cuz they're following Congress's lead!
Have you investigated opening a new credit card, transferring your balance, and cancelling the old one?
No it hasn't.
As of Feb 1, it will be exactly zero, and I hope it remains that way.
That's a damn lie. My minimum payment required dropped 25% last month under their new method.
My minimum payment is 100%, every month.
No, but that would probably be a good idea. Probably would save me a good chunk of change.
I am fixing to call my credit card company. I swear they are applying my card payments to someone else's card. I can't believe that I have chunked so much money into paying back and haven't used the card but the balance on my card keeps going down. I have no idea why this is so. The company is Bank of America. Don't ever get a card from these crooks. I am thinking seriously of taking legal action. I have put nice size chunks of payments into paying off the card and nothing seems to be happening.
"Your Credit Card Payment Just Doubled" - well, NO>
Thankfully, I saw the light as I prepared for retirement a few years ago; paid off all of the credit cards, cancelled the accounts and went with a single debit card accessing my checking account.
Now, If I don't have the money in the account, I wait until I do to buy whatever it was. You would be surprised just how many stores will put something away for you if you ask them to hold it until the first of the month when you retirement check comes in.
But it's false: the new formula is the minimum payment is the larger of 2% of the balance, or 1% of the balance plus all finance charges (including interest, late fees, balance-transfer fees,. . .).
If your credit card issuers are giving you 12% APR or less (common enough for the banks' favorite debtors, who carry balances but always make their payments) nothing changes, and unless you're at 36% APR the payment won't go to 4% of the balance.
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.