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.