Your Credit Card Bill Could Give You a Heart Attack This Month

Posted on 06. Jan, 2006 by in Saving & Investing

When you open your credit card bill this month you will most likely see a warning about how long it will take to pay off your bills if you only make minimum payments — a requirement of the Bankruptcy Reform Law. In addition, you may find that your minimum payment has been doubled. I know that mine has, so in order to prevent heart attacks in my readers I thought it my duty to warn you.

The Seattle Times reports that federal banking regulators have issued guidelines to credit card issuers requiring that minimum payments cover at least one percent of the balance, including finance fees. The result can be a minimum payment of three percent — in contrast with the current minimums of approximately two percent which cover only interest and other fees.

Major card companies, including MBNA, Citibank and Bank of America have already instituted double minimums and other companies are expected to follow, Knockout Debt, a debt reduction company, said in a press release. American Express will charge two percent of the outstanding balance plus finance charges or $15 whichever is greater. Capitol One does not break out the charges in their increase but will institute a minimum payment of three percent, Bankrate.com reports.

For the seven percent of Americans who make only the minimum payment (hopefully this is not you – I thought I taught you better), the change will help them get out of debt sooner, even if the initial payments are painful. But credit card companies are prepared for losses from defaulting cardholders who may consider filing for bankruptcy protection, according to the Knockout Debt report. The new bankruptcy law has made this a more difficult process for most people.

The good news is that Myvesta, a nonprofit consumer education company, reports that overall credit card debt is down 11.4 percent from 2004. The average American carries $2,328 in debt, down from $2,627 last year. Steve Rhode, president of Myvesta, expressed caution about these results, warning that consumers could wipe out their progress in debt reduction during the holiday season. But fortunately for you I warned you about excessive credit card spending during the holiday season… right??

The Myvesta survey also found that males carry an average of $2,369 in debt on 2.8 cards and females have $2,289 on 3.1 cards. Married persons average $2,625 in credit card debt while single individuals average $1,744. Consumer debt is highest in the West and lowest in the Midwest.

So when you open that credit card bill this month be sure to open in slowly…

Trackbacks/Pingbacks

  1. BeancounterBlog.com » Guest Post: Shane Wright on New Credit Card Legislation - January 13, 2006

    […] Today I’m please to announce our first guest writer, Shane Wright — the man I affectionately call the “Budget Meister.” He’s written a great article which happens to follow up with my earlier announcement on the increase in credit card minimum payments. Here’s his 2 cents… […]

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