Minimum CC Payments Doubling?
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Minimum CC Payments Doubling?
| Tue, 05-24-2005 - 10:31pm |
I receive an online newsletter from the About.com credit card moderator and he's posted an article saying that all CC companies are in the process of doubling their minimum payments from 2% to 4%. I believe he said Bank of America has already done this.
Has anyone else heard anything about this? I have to admit it sent me into an absolute panic, as we have 2 CCs and my dh is currently laid off and I only work part-time. I'm still paying a bit more than the minimum on the cards each month, but if they double, I don't know what I'm going to do...

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http://www.13wham.com/news/local/story.aspx?content_id=FE6E63A6-79B4-4A1C-8559-FA59B0E1FD8D
Defintely a great reason to get them all paid off and gone! That was an interesting article, and it really brought home to me how important snowflaking is.
Wow.
Lisa
oh well............
I read your message and kinda freaked out for a sec so I did a little research on this. It looks to me that what the Comptroller of Currency office set out to do in 2003 was to make sure that credit card companies have it so that if consumers pay the minimum payment their debt will be gone within 7 to 10 years. As it currently stands if you have an high interest rate, say 20% on a $10,000 card it will probably take you about 30 years to pay it off only paying the minimum. It looks like they want to make sure it's paid sooner than that. Say your interest rate is only 4% or 5% because you consolidate to all one card than 2% minimum payment more than covers interest, fees and principle and amortized the card will be paid in probably 5 to 7 years under these circumstances.
I spoke to Chase today and asked them if my minimum would go from 2% to 4% and they said no on account that I didn't meet the criteria in which they are raising the minimums. I currently have $9,000 at 3.9% until the balance is paid off. Paying 180 a month consistantly would pay this off in under 10 years. I think the 10 year rule for payoff is what they are using to determine if your minimum goes up. It doesn't appear that everything accross the board is just going to go up from 2% to 4%. I also spoke to Universal card and they said that they don't use the 2% minimum but instead take your balance and divid by 48. They said they aren't changing. Now, I could be wrong about all this but this story here made sense to me about the issue. I'm going to call AMEX and see what they're doing.
http://www.bradenton.com/mld/bradenton/business/industries/10686833.htm
Some banks might charge 2% and then another 1% of the total outstanding balance. I think as long as you're making a minimum payment that is hitting a good chunk of principle as well this new rule may not effect you. You may want to contact the Comptroller of Currency office though just to mkae sure.
I hope some of this helped a little bit because I was quite freaked out when I first read you message.
Edited 5/25/2005 8:03 pm ET ET by amykmi
I agree, it makes me nervous too. But if you think about it the credit card companies are being Forced to change. Consumer advocacy groups are the ones demanding the change to higher minimums. Higher miniums means more defaults (bad for credit card comapnies) and debt being paid faster (bad for credit card companies, less interest collected). I am still nervous though as I have all my debt on two cards with good interest and I am making the same payment every month and will be out of debt in three years. Now if they raise the minimum to twice as much this will really hurt me. However, both rates are quite low and I'm paying off quite a bit of principle every month. I like you though just want to be 100% sure this will stay the same and that they're only going after people that are very late or aren't paying down any principle. I wish I was sure. Remember this too, some banks: MBNA, Bank of America have already started this "rasiing of minimums" some time ago (2004). I hadn't heard about it until just today and figured I would have.
Heck, I don't know 100% but lets just hope they won't double on everything. I'll let you now what else I find out and please do the same if you hear anything new.
Thanks
More articles I found on this topic.
http://www.creditshack.org/archive/53-minimum-payment-rising.html
http://credit.about.com/od/creditanddebitcards/a/051805.htm
http://creditcardsmagazine.com/ManageArticle.asp?C=90&A=8363
This is from the Office of the Comptroller at the Treasury. These are the guidlines they set out for credit card comapnies. They actually look as though they are for the benefit of us, the consumer. Now, how credit card comapnies handle it is a seperate issue but I can't see them not taking the guidance from the body.
http://www.occ.treas.gov/ftp/bulletin/2003-1a.pdf
What it is basically saying is that credit card comapnaies can no longer have negative amortization. That is where the minimum payment no longer covers interest and fees and when you make a minimum payment you actually are even MORE in debt. The credit card comapny counts that as income. The Comptroller wants that to stop. They also suggest that if you makethe minimum payment it pay off enough principle that your debt is paid in full in around 60 months. Work out a schedule and see if you fall into this catagory. If you do I doubt that the minimum will change for you. Don't quote me but I think the stories about ALL minimums going from 2% to 4% accross the board is wrong. It will just depend on your situation. I spoke to AMEX last night and the lady said it was going to be 2% for them still and she knew nothing of the change. She said that it may be happening to some accounts that are over their limits or have negative amortization. Face facts though.....we all got into debt here and maybe this tactic will put even more of a fire under us to get our debt paid forever. I guarentee that once I'm done I'm NEVER getting back into debt again! So a story like this won't even remotley bother me.
I totally agree with what you've said.
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