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Minimum Credit Card Payments To Rise
By: Charles Essmeier
For years, major credit card companies have allowed cardholders to make minimum
payments of 2% of the outstanding balances on their credit cards. Having
customers pay the minimum doesn’t reduce the balance by very much, but when the
18-30% interest rates that many credit cards charge is applied, the result is a
profitable ones for the banks that issue credit cards. A balance of $1000 can
take nine years to pay off at 20% interest if the borrower only pays the minimum
due each month.
Clearly, it is not in the best interests of consumers to pay the minimum every
month. But tens of thousands of Americans do just that, carrying huge balances
and paying the minimum every month. The average household now carries $10,000 in
credit card debt; for many people, paying the minimum is all they can manage.
Due to changes in Federal law, several major credit card issuing banks will soon
raise the minimum amount due to 4%. This might seem like a small increase, but
if you are already deep in debt and paying the minimum amount, this could cause
your payments to double. If you have a $10,000 balance and you are paying $200
per month, you will soon need to come up with $400 instead. Many people will
find this impossible to do, as they are already paying as much as they can. What
solutions are available?
The usual common sense rules of credit card use apply here. Stop using your
credit cards. See if you can consolidate your debt on another credit card with
lower interest. See if you can cut out some unnecessary expenses in order to
free up some more money to pay your balance. Consider a home equity loan to
consolidate your debt. Call your card issuing bank and see if they can work out
repayment plan or lower your interest rate. There are numerous solutions
available, but card holders need to be aware that the minimum payment is rising,
and it isn’t going to come back down. By charging a 4% minimum, the credit card
issuing banks are hoping that consumers will pay off their debt a bit sooner and
that fewer consumers will find themselves in a situation where filing for
bankruptcy is the only solution. And once October comes around, even filing for
bankruptcy will be more difficult. Credit card holders with large balances on
their accounts should give considerable thought to reducing their debt now, as
payment options and requirements are going to be more strict from now on.
About the Author:
©Copyright 2005 by Retro Marketing. Charles Essmeier is the owner of Retro
Marketing, a firm devoted to informational Websites, including http://www.End-Your-Debt.com,
a site devoted to debt consolidation and credit counseling, and http://www.StructuredSettlementHelp.com,
a site devoted to information regarding structured settlements.
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