Credit card minimum payments could double in January

Banking regulators are recommending that credit card companies increase their minimum payments from 2% to 4% of the debt starting in January 2006. This change is designed to make consumers who only pay the minimums each month reduce their interest costs and pay off their debts faster. Borrowers who have a lot of credit card debt and are only paying the minimum each month may feel the pinch when this new policy goes into effect next year and should start rearranging their budget now.

Of course, paying the minimum amount due will still be a pretty terrible idea even after these changes are implemented. Bankrate.com has a free online calculator that can help you calculate how long it will take to pay off your debt and how much interest you will have to pay if you only pay the minimum each month. You might want to sit down for this...the results are shocking.

For example, a $5,000 credit card balance at 18% APR with a 2% minimum payment ($100) would take 46 years to pay off and will cost you a whopping $13,000 in interest. Just thinking about this gives me heartburn! Increasing your minimum payment to 4% ($200) reduces the repayment period to 12 years and drops your interest costs down to $2,900. Better yet, increase your monthly payment to 100% and avoid interest charges altogether. 

Comments

[JT]

It is of course great that these are doubling. It will hurt some that can not afford their payments anyway, but those people were on a slow downward spiral, and this will help them out in the long run if they can learn from their credit mistake.

I linked your story:
http://moremerchant.com/18/credit-card-minimum-payments-could-double-in-january/