Feds Raise Credit Card Minimum Payment
By this time next year, your minimum monthly payment for your credit card(s) will double. The federal government is requiring all banks to raise the minimum monthly credit card payment from 2% to 4%.
Consider a family with three credit cards all with interest rates of 16 percent, which is a standard rate.
Card #1 has a $2,500 balance. At two percent, the minimum monthly payment on is about $50 dollars–$33 goes toward interest; $17 to principle. At four percent, the minimum monthly payment doubles to $100, $33 still goes to interest; but $67 goes toward principle.
Card #2 has a $6,000 balance. At two percent, the minimum payment is $120 with $40 going to principle and $80 to interest; at four percent it’s $240 with $160 going to principle and the remainder to interest.
Card #3 has a $10,000 balance. At the new 4 percent minimum, the $400 payment would cover $267 in principle and $133 in interest.
While the family would be paying off their balances much faster, their monthly payments would double from $370 a month to $740, something that many would probably find difficult to afford.
Then consider that most families have 5 to 8 credit cards.
While this might just be the kick in the pants some people need to pay off their credit cards balances faster, it could be a scary proposition to those who only make their minimum payments. Escpecially when you consider only one in six families pays more than the minimum due every month.
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