Credit Card Minimums Going Up
In response to regulatory agencies mounting concerns on rising credit card debt, many of the nation's credit card companies are increasing minimum monthly payments on card balances.
Regulators have been pressuring credit card companies to raise minimum payments for several years because the amount of credit card debt per household has risen to nearly $10,000 per household. RAegulators issued a directive in 2003 asking creditors to consider establishing seven-to 10-year payoff periods by the end of this year. That factor, added to recent bankruptcy law changes that make it harder for some consumers to erase their debt and require more lengthy disclosures have card issuers looking at higher minimum payments.
Recently, several major banks announced that their minimum monthly payments would rise from the current averagACe of 2 percent to about 4 percent. According to Bankrate.com, that means that the couple who goes to Hawaii on a $2,000 credit card debt at 18 percent interest and only pays minimums will pay off the debt in 10 years with interest of about $1,100 compared to 30 years and interest of almost $5,000 at the 2 percent minimum payment.
Copyright © 2005 Bankers' Hotline. Originally appeared in Bankers' Hotline, Vol. 15, No. 8, 8/05
First published on 08/01/2005