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 ...
Some of my payments actually went down.
Your balance keeps "going down"...? isn't that what you want it to do when you make payements?
Or did you mis-speak (type)?
"[T]his exceeds what happened in Texas right before the oil bust and S&L collapse in the late '80s."
*BINGO*! You just won the Grand Prize.
Roger that.
Anyone who yearns to make a 2%/month payment when interest is in the twenty-four annual percentage rate shouldn't have been allowed to open an account. On the other hand a company allowing that should be put out of business. But a fool and his money...
Wise parents. Be glad you had such good teachers. Very rare.
Instead of razing, today people live slightly farther north in new suburbs in Plano and Frisco, building houses that 10 years ago might be $150K -$200K homes but today are selling for $500K-$750K+. The dot com graph on your personal page nails it. This is vapor equity.
Two things are propping up the market here: (1) immigrants (20% of the population) and (2) inflated appraisals for lending purposes.
If the house of cards doesn't crash in the next couple of years, I see it doing so no later than when the first wave of Baby Boomers start to retire. Since they turn 60 this year, max we're looking at is five years.
Full balance due < 10% of money in checking account.
I recommend these formulas.
In general, it's a good idea. However, sometimes, it's just not possible. I try to follow a similar rule, but when there have been special circumstances, you just have to break them. For instance, there was the time my father had a heart attack, and I needed to get to NY right away. Without my credit card, I never could have done it. And I took 4 or 5 months to pay it off. Same with major, unforseen auto repairs.
There could be others as well, but in general, yours is a good rule.
Mark
They can triple it for all I care.
I will be so out of debt pretty soon.
you see, I just got this letter that says if I open a checking account, they will pay a huge fee just for allowing them to use my account to park money they have from the estate of some murdered emir, or soemthing like that.
Whoo-hoo !
CITIBANK? same deal here, except I went over my credit line once to buy text books and my rate went from 9.9% to 31.4%.
"So the government nudged credit card companies into saying, 'This isn't working.'"
Why is it that this discussion has gone this far without somebody asking what damn business is it of the imperial federal government to "nudge" credit card companies into revising their minimum payment requirements?
Sheesh!
Sometimes I wonder about you people.
Read TommyBear's post -- it's hilarious (and tragic).
http://www.prudentbear.com/bearschat/bbs_read.asp?mid=362334&tid=362334&fid=1&start=1&sr=1&sb=1&snsa=A#M362334
my minimum payments haven't increased at all.
Great start! I went through a year of catch as can employment before landing a good job. Starting over at 53 ain't easy. Ran up about $5,000 on four cards. NEVER pay late. Got sloppy once, had to pay Fed-Ex $15, but stayed on time, almost always above minimum. These guys are always sending balance transfer deals. Look for at least long term, I have mostly life-of-loan now. Highest interest I am paying is 14%, most less than that, $2,000 at 2%. NOT 2% above prime, 2%!
If you get caught in this, make those cards high priority, organise the bills so nothing gets lost in the shuffle. Soon as you are able, start whacking away at them, high interest first.
I just retired after 36 years with the federal gov't...the best advice I got was to go out debt free....so two years before I retired I spent every extra dime paying off any debt I had....I now have ONE credit card with a zero balance and my total debt each month is mortgage and utilities....and I plan on keeping it that way....I don't even carry the credit card with me....
Might be a very good thing...
This is happening to one of my sisters right now. Their mortgage used to be about $1000/month. But she and her husband kept maxing out their credit cards, and then kept tapping their home equity. All this despite me telling them for 20 years not to use credit. Me and my wife pay off our credit card balance every month, and don't owe anything. But then again, we're Repubs and they're lib Democrats.
They both got laid off, and couldn't make the high mortgage payments (nearly $4000/month). Now their house is up for sale, their equity is nearly tapped out, and they are in deep sh*t. And they have no one to blame but themselves, as they spent a lot of their borrowed money on frills. She says I'm lucky and rich. I tell her no, I'm Republican and wise. (I got laid off too, but have no debts and have money in investments.)
Truer words never spoken...
Based strictly on the parameters laid out, it was less money going out the door, regardless of how the money came in.
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