Minimum Payment Required on Credit Cards Going Up
Credit card companies typically required customers to make a minimum payment of just 2 percent of their total card balance. That 2 percent only helped pay your interest and fees and didn’t help make a dent in the actual principal amount you owed. In 2006 the government stepped in and required credit card companies to have cardholders – meaning you – pay a minimum monthly amount that equals your interest, fees, extra charges AND at least 1 percent of your principal amount due on the card. That means that most people’s minimum monthly credit card payments is now at least 4 percent of the total card balance. Hopefully the increased amount due will help you pay off – or at least pay down – your credit card debt more quickly.
When your next bill comes, take a close look at the fine print to see what your credit card company is now requiring for your minimum payment due. While you’re looking, take note of what your card issuer is now charging you for cash advances, late payments or spending over your credit limit (if allowed with your card). You may be surprised to see that the interest rate or fees for those services have increased as well.
You may want to keep a closer eye on how much you are charging on your credit card while you see how the new minimum payment required will affect your budget. It may help you think twice before charging items if you think that the new minimum payment required will effectively double the monthly price of your purchase. For example, let’s say you’re considering buying new bedroom furniture and the monthly minimum payment for the set would be $200. With the new increased payment required that jumps to $400 per month. Thinking that way may help you reconsider charging items, or saving to pay cash instead.
If the new minimum amount due is more than you can afford, contact your credit card company to discuss your financial situation and see if you can work something out to keep you current on your account. For example, your credit card company may be willing to negotiate a more feasible payment plan or to lower your interest rate, which can help offset the increase minimum amount due each month.
If you’re concerned about how to make your new monthly payment, take a look at our 10 Simple Steps to Start Saving Money Now and consider creating a personal budget to help you take control of your personal finances and get a game plan together to make your monthly credit card payments.