Ohhh my head.....

iVillage Member
Registered: 06-13-2005
Ohhh my head.....
10
Tue, 06-28-2005 - 2:20pm

I have heard this before on the tv and read online, but chose to ignore it. The fact that the minimum payment on our credit cards will go up. I have one card where the min payment is already $228.00 per month, if it goes to $456 per month I am completely up the "brown" creek. Does anyone have any information on this? Will it only effect people who are not in good standing with the credit card companies? My head is spinning and I am scared to death.

Jennifer

iVillage Member
Registered: 06-04-2004
Tue, 06-28-2005 - 3:20pm

I just got this this morning, maybe it will answer some of your questions. Hope so!

If you have credit card debt, there is no gentle way for me to break this to you: Your minimum payment is about to increase, and not because your company wants to make your life miserable. If you're carrying credit card debt, you're probably doing a good job of that all by yourself.

Your credit card company prefers for you to pay as little as possible each month, not more. They want to keep you in debt forever. That's why they've been so willing to accept a tiny percentage of your balance each month. But hang onto your fine print because all of this is about to change.

There's been a crackdown by the Office of Comptroller of the Currency (OCC). Banks and credit card issuers who have

been ignoring the rules will be forced to ratchet up required minimum monthly payments so customers pay enough each month to cover all fees, interest and at least some of their outstanding principal balance.

For example, consider the customer who has a $10,000 balance with a 16 percent interest rate and who makes a 2 percent minimum monthly payment. It will take more than 40 years to pay off the balance and cost $19,329 in interest. With a 4 percent minimum, the loan is paid in about 14 years with interest costs of $4,931. Somewhat better.

Many credit card companies have been taking unfair advantage of consumers. By encouraging smaller and smaller monthly payments while charging higher and higher interest -- and not fully disclosing the foolishness of paying only the minimum monthly payment -- they are in fact tricking consumers into paying more interest and being in debt for decades. No wonder credit card company profits are up by more than 30 percent.

Consumer groups and legislators have had it. They're up in arms and putting pressure on the OCC to do its job and require minimum payments to be at least enough each month to cover all fees and interest and to pay down at least some of the outstanding balance, too.

If you have no credit card debt this means nothing to you, although it's important information for you to know. Perhaps you can pass it on to others.

If you have credit card debt, consider it a loud warning that it's time for you to take control of your situation. If you are paying 2 percent, expect your monthly minimum payment to double to at least 4 percent.

If facing the possibility of doubled monthly payments is causing you anxiety, take that as the signal it's time to get yourself into gear and out of debt. Stop adding to your debt and create a reasonable plan to get out of debt. There are several ways you can do that right now, but none simpler than my Rapid Debt-Repayment Plan (RDRP) and corresponding Calculator.

You can learn all about this method including a no-cost demo of the RDRP Calculator at CheapskateMonthly.com (look under Quick Links). It is very logical -- simple, yet empowering. Isn't it about time for you to get serious about freeing yourself from the heavy load of consumer debt?

From Mary Hunt @ Everyday Cheapskate.

~leanne

~leanne

deciding to be happy doesn't mean that everything is perfect, but that you had decided to look beyond the imp

iVillage Member
Registered: 06-13-2005
Tue, 06-28-2005 - 3:44pm

I received that in my e-mail too, that is when my head starting hurting. Does anyone know when this will all begin?

Jennifer

iVillage Member
Registered: 02-24-2005
Tue, 06-28-2005 - 7:03pm

Jennifer,

I am sooo glad I read your post because I had no idea this was about to happen. Currently I just make it by the skin of my teeth paying the CC bills so if they double, I'm done. Bye bye house. I'm wondering if this is a good time to refinance again. Please keep me/us updated on any info you get.

Thanks,
Kim

Photobucket

iVillage Member
Registered: 03-27-2003
Tue, 06-28-2005 - 8:53pm

We phoned our CC company to find out the details. This is not happening to all companies because not all CC companies were charging the low minimum payments to begin with. I would encourage you to call and talk with them before stressing out too much. Ours also told us that we could close the account and continue paying the current minimum payment instead of changing. Obviously, you wouldn't have the card then but in our case we have one CC that we carry a balance on (2.99 for life of balance), 1 that we use for household purchases and pay off monthly and 1 that DH uses for work. We would close the one where debt is carried if they changed their policies.

DH also did some research and found that companies used to charge 4 percent as your minimum monthly payment as their baseline.

Now...I just hope the person we spoke to wasn't confused or uninformed.

Taleyna

iVillage Member
Registered: 06-13-2005
Tue, 06-28-2005 - 9:12pm

Thanks, I have been toying with the idea of closing my accounts simply so I am unable to charge on them. Though this situation is very bothersome I figure they are not going to do anything before I return from my Disney vacation (7/8 to 7/15), so I am just going to not worry about it for now. When I return from vacation I am gonna call all 3 of my creditors and discuss my options. Though I have alot of debt, I have good credit and just because they changed their policy I don't want that good credit to go bad. Thanks for the advice. However, if anyone has any more information on this subject it would definitely be welcomed.

Jennifer

iVillage Member
Registered: 03-27-2003
Wed, 06-29-2005 - 11:06am

Keep your eyes open in your mailbox for an official-looking, but unimportant-looking piece of mail. Also check all your statements. At some point, the cc companies will send you a copy of your new cardmember rules, and it probably won't be anything big or obvious, so read everything!

When you get it, it will probably have the option to reject the changes, and you can close your account and freeze your agreement. Follow the instructions carefully, and do it quickly, and document it.

I think it's good that people will have to pay more than the fees and interest on their accounts, but it does put some people who are just scraping by in a very difficult position. It can also set others off if you're paying a lot to one cc and minimums to the others, you may have to adjust how you're distributing the funds among your ccs.

Still, I don't think they can force you into the changes if you have an existing account. Good luck and keep us updated.

Heather

iVillage Member
Registered: 02-14-2004
Wed, 06-29-2005 - 1:21pm
Its a good idea to contact the creditors and discuss options. Be aware though, that many creditors require the account to be paid off in order to close it. The exception is if you are enrolled in a debt management plan, then they will close it before it is paid off. You may want to consider a DMP, if you really can't handle an increase or are barely making the minimum payments. They will consolidate your debt, give you one monthly payment that is about 40% less than you are paying now, and close all of your accounts. You can keep a card open for emergencies. Also, the current FICO formula does not pay attention to any reference to DMP, so no damage to credit scores.
iVillage Member
Registered: 03-27-2003
Wed, 06-29-2005 - 1:44pm

The FICO may not pay attention to debt minimums, but it does factor in some credit decisions. When we were applying for our mortgage (we applied in three places), everyone wanted to know what our minimum debt payments were each month, and this factored in whether they thought we could "afford" our mortgage payment. And those minimum payments are recorded on the credit record.

Credit scores are an important indicator of where your credit stands, but it's dangerous to get too wrapped up in them. Many creditors and other businesses that use a credit report (such as employers and rental companies) are considering more factors than just the score.

But I totally agree that the best first step may be to contact the creditors and discuss options. They don't want you paying more per month if they can help it anyway, so they'll probably help you work something out.

Good luck!

iVillage Member
Registered: 06-13-2005
Wed, 06-29-2005 - 2:10pm
If I can freeze my accounts that will fine with me - I don't want to have access to the accounts anyway. As long as I don't have the double payment.
iVillage Member
Registered: 06-13-2005
Wed, 06-29-2005 - 2:12pm

Hmmm... really. I was a CCCS member over 10 yrs ago and it was treated as a step above bankruptcy. It took me forever to get my credit back to good. Is that really true DMP won't effect my score? I am worried about that also because he 2 yrs or so we are going to be purchasing my in-laws house and though I will have debt I want a good score too - kwim?

Jennifer