Paying less than the minimum

iVillage Member
Registered: 03-14-2005
Paying less than the minimum
10
Mon, 03-14-2005 - 6:02pm
The minimum payments on my credit cards are now taking up too much of my monthly budget. They total over $300.00 month. This leaves me with hardly anything left after paying the credit cards and the rest of my bills. So in order to pay for anything "extra", like car repairs, haircuts, clothes, etc. I usually end up having to use these same credit cards to pay for such things. If I didn't have these credit card payments, I could pay for these kinds of expenses in cash. So it's like a catch-22. The situation is keeping me dependent on the credit cards and keeping me further in debt.
I was wondering, what if I started paying the credit cards, let's say, half of the minimum payments, thereby leaving me with more money so that I might not have to use them anymore. What might they do to me? I have always paid at least the minimum payments on time, so not doing so would be something new to me, and I don't know what would happen.
Right now I have a very good credit score, and I' m sure that not making the minimums would hurt my credit score somewhat, but what else might happen? Should I call them up and propose my idea to them? What happens if you miss a payment? Let's say you pay one credit card bill one month, and the other one the next month, thereby skipping a payment?
Does anyone know what could happen? Any similiar experiences?
Thanks.
iVillage Member
Registered: 03-07-2005
Mon, 03-14-2005 - 6:32pm
I'm lurking but had to say that making any late payments, skipping a payment, and making anything less than the minimum amount due will result in a hit on your credit report, harrassing phone calls, late fees GALORE! and probably overlimit fees. To be honest, any of these will only make your situation worse. Instead of a $100 minimum payment you'd be upping it by at least $30/mo w/ late fees and another $30(sometimes these numbers get as high as $49) plus the next month's minimum payment. And they will not leave you alone until you are current. I've learned some of this the hard way--I was in the same horrible cycle you're talking about now.
iVillage Member
Registered: 11-13-2004
Mon, 03-14-2005 - 7:04pm
If you are going to talk to the credit card companies about anything, it should be about them lowering your interest rate, since you mentioned you have a good credit score. I wouldn't skip a payment, this will hurt your score. I would also look into doing a balance tranfer so you are paying less interest. Then this will make it easier to pay more than the minimum and pay them off sooner. If you have alot of cards, I would cut them all up except one and keep that one for emergencies only. It should be the one with the lowest interest rate. In the meantime, you may want to sit down and review your income and expenses and find ways to cut expenses or to earn more money. You should also try to put money away for emergencies, so you don't have to continue to use your cards for necessities. A good starter emergency fund is around $1000. Good luck to you.
iVillage Member
Registered: 03-27-2003
Mon, 03-14-2005 - 7:06pm

Welcome to the board, and thanks for joining us. I know it can be frustrating trying to get ahead at the beginning of the journey to get out of debt. And to be honest, short of a lottery win or major inheritance, there really is no quick and easy way out.

In answer to your question, if you begin paying less than the minimum, here is what will happen:

1. They will charge a late fee, probably at least $35.
2. They will raise your interest rate, probably to around 25 or 30%.
3. Your minimum due for the next month will increase by the amount you did not pay the previous month, plus the late fee, plus the extra interest accrued because of your increased interest rate.
4. They will report you as 30 days late on your credit report. If you continue to pay less than the minimum, they will report you as 60, then 90, then eventually they will send it to collections, which will simply destroy your credit rating.

If you begin paying every other month, something similar will happen.

As you can see, it can lead to a situation that will be much, much harder to get out of and, moreover, it will ruin your credit rating. Not to mention, you are probably only barely paying the interest that is accruing each month, so if you don't pay the minimum due you will end up owing more and more each month even if you're not actually charging anything.

Here is what I suggest instead:

1. Call the credit card companies and ask them to lower your interest rate in recognition of your good payment history and credit rating. Sometimes that's all it takes to get your interest rate lowered.
2. If that doesn't work, shop around for a credit card offer that will reduce your monthly payments. Alternately, and perhaps preferably, call your bank or credit union and see about a personal loan to consolidate your debts and lower your payments.
3. Get in the habit of living *below* your means. This may require quite a bit of work and re-conditioning. If you find it impossible to pay your credit payments and make ends meet elsewhere without charging more, you may need to look into getting a second job temporarily until you are able to manage on the one income. Many of us on this board have done exactly that. The main thing is, if you want to be debt-free, you have to learn to live under your income, which includes setting money aside each month to save for the "unexpecteds."
4. Stick around this board. It is full of the most helpful, amazing folks, and you will be well supported.

Congratulations on taking a step toward recovery, and on coming here while your credit is still good. You will thank yourself for taking these steps. I hope to see you around.

Blessings,

Heather

iVillage Member
Registered: 02-19-2004
Mon, 03-14-2005 - 8:20pm

Please listen to everyone that has posted. If you are going to stop paying the minimums and you have no plan to ever get out of debt, you might as well just file bankruptcy right now. Both options (paying less than the minimum or filing bankruptcy) will ruin your credit for years to come, but at least bankruptcy lets you start over.

The best plan is to live very frugally for the next little while so you can pay more than the minimums and reduce those payments, then keep paying every extra penny you have so the balances start dropping. As the balances drop, you will be charged less interest and you will start getting out of debt even faster. Eventually you won't be so dependent on the credit cards and you will get some zero interest offers, and transfering your balance and not paying interest for a while will allow you to make some real headway on your debt.

The easiest way to save money and have more to pay toward your credit cards are spend less at the grocery store, cancel your cable, cancel your phone (cancel home phone if you have a cell), find a cheaper internet connection, get a cheaper cell phone plan, get a friend to cut your hair for free, stop at thrift stores, switch to cheaper car insurance, don't buy gifts for anyone this year, don't eat out, take your lunch each day... those are some of the things I've done.

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iVillage Member
Registered: 04-16-2004
Tue, 03-15-2005 - 5:56pm
Hi! I just happened to be reading this board and saw your message. Whatever you do DON'T stop paying your minimum payments!! I know exactly where you are coming from. I payed all my cards on time without a late payment for years and then I got sick and had to go on disability. I lost alot of income and therefore got into the catch 22 situation that you find yourself in now. I continued making the minimums on all but one card to free up some money and now the balance has gone through the roof with late fees,high interest,etc.The phone calls never stopped and even though I paid something on it it still wasn't the minimum and they don't care. It became so bad that I'm currently trying to negotiate a settlement with this credit card company in hopes of taking care of it for good. Take the advice of all the other posters-cut costs where you can with phone bills,cable,groceries that aren't necessary,etc. You'll be better off. Best of luck to you!
iVillage Member
Registered: 12-07-2003
Tue, 03-15-2005 - 9:06pm

I think the last thing that you need to do is miss a minimum.

Avatar for cl_beckymk
iVillage Member
Registered: 03-19-2003
Wed, 03-16-2005 - 10:28am

Hugs!!!


I know it's hard and everyone here has already told you what would happen if you skip the minimums.


Just wanted to let you know we understand your frustration and where you are feeling at right now.


Have you had a chance to track ALL your spending?

iVillage Member
Registered: 03-27-2003
Wed, 03-16-2005 - 10:37am
When DH and I first got married, we each had our own citibank account. One time I mixed up the checks, put mine with his stub and visa versa. Now the difference between the two minimum payments was $1.50. Do you believe they called us everyday for a week for that $1.50. After we spoke to a manager and explained what happened and they verified it by looking at the other account, I asked if they really wanted a check for $1.50, since we would also have to pay postage and check fees (this was before free checking). Well they wanted their money. So I paid the $1.50, opened another credit card and we paid off and closed both Citi account. Then the phone calls begging us to come back started. I told them it was their choice to lose two long term customers over $1.50.
From what I understand, Credit companies are even less forgiving now. If you are late, they jack up the interest rate, thereby making your problem worse. I would try to cut expenses first. We canceled our cable and DSL when it was really bad.
Have you looked into credit counseling? They can help get you a reduced payment, just make sure you use a reliable one.
As for the credit card trap, I can still remember when that realization came to me. That if I didn't ahve to pay the credit cards, I wouldn't need the credit cards. It reminds me of new variation on share cropping or company town & store of the 19th century. You had to buy everything from the people you worked for who changed more than you made, so you were always in debt and could never leave.
Good luck and keep your spirits up.
iVillage Member
Registered: 07-06-2003
Wed, 03-16-2005 - 9:15pm

Welcome to the board!

You now know from the other posters the ramifications of missing the payments on your credit cards.

You mentioned that in part the reasons you keep charging are because of incidentals such as haircuts, clothing, other bills etc...
In order to really conquer the credit card debt you've got to analyse your spending.
For instance if you need to get your hair done, try to stretch out the time between visits, go to a cheaper but yet reputable salon, find a friend or friend of a friend that does hair in her home, even try beauty schools where students use their skills and you'll pay next to nothing.

Find cheaper alternatives for things you cannot cut out completely, but be prepared to pare down on things like high speed or extra channels etc...doing all this will free up more money to attack your largest debt.

I hope things work out for you,
Kassandra

Kassandra

"It is said that life has its peaks and valleys.  The challenge is to accept them equally and experience them

Avatar for cl_phocid
iVillage Member
Registered: 03-26-2003
Thu, 03-17-2005 - 2:44am

Hello and welcome to the board.

All my best,
Danni