Minimum Payment Increases for Some Cardholders in July
In July, Bank of America credit card customers will be paying a little more in minimum payment on their monthly bill. Currently, these cardholders are paying a minimum of $10 plus interest and fees. Beginning in July, they will have to pay 1% of their balance plus the interest and fees.
This will result in a more expensive payment for millions of consumers. If you have been paying just the minimum payment on your card and have a balance of $5,000, you will be paying an extra $40 per month.
According to the latest Experian-Gallup Personal Credit Index Survey, 11% of consumers said they usually paid the minimum payment on their credit card, but not much more. Since Bank of America has over 32 million active credit card accounts based on the latest Nilson Report, this new policy will affect an estimated three million consumers.
"Credit card companies love the consumers who only make the minimum payment. Issuers are making a tremendous profit on these consumers because of the incredible interest payments they make for years and years," says Bill Hardekopf, CEO of LowCards.com. "Increasing the minimum payment from $10 per month to 1% is a small step in the right direction, but consumers need to be paying a lot more per
month if they want to get out of the horrible credit hole they get sucked into by running up debt on their credit card."
For example, if you have a balance of $5,000, an interest rate of 15%, and a minimum payment percentage of 1%, you will pay approximately $112 per month ($50 for the minimum payment and $62 for interest). It will take almost 26 years to pay off your balance and you will pay $5,974.97 in interest. If you increase your payment by just $38 to $150 per month, it will take less than four years to pay off the balance and you will pay $1,508.52 in interest.
"If you are only paying the minimum, you are probably paying more in interest each month than you are toward your balance. The only way you can pay off your debt is to pay more than the minimum. To help you do this, call your credit card company and request a higher minimum," says Hardekopf. "In the next few weeks, if you get a tax refund in the mail, use that to pay down your credit card balance.
"The minimum payment is one of the most misunderstood and poorly explained principles of credit cards," says Hardekopf. "In 2005, new regulations forced credit card issuers into increasing the minimum payment percentage so that at least a small portion of the monthly payment would go toward the balance. Unfortunately, this percentage is difficult to find and is not listed in most terms and conditions. Call your issuer to find out the percentage used for your account, then use a rate calculator to figure out how long it will take to pay off your balance. Most consumers will be shocked to find how long it will take them to pay off the balance by just paying the minimum. While Congress is focused on the credit card industry, they should require credit card companies to provide this calculation on the cardholder's monthly statement."
This will result in a more expensive payment for millions of consumers. If you have been paying just the minimum payment on your card and have a balance of $5,000, you will be paying an extra $40 per month.
According to the latest Experian-Gallup Personal Credit Index Survey, 11% of consumers said they usually paid the minimum payment on their credit card, but not much more. Since Bank of America has over 32 million active credit card accounts based on the latest Nilson Report, this new policy will affect an estimated three million consumers.
"Credit card companies love the consumers who only make the minimum payment. Issuers are making a tremendous profit on these consumers because of the incredible interest payments they make for years and years," says Bill Hardekopf, CEO of LowCards.com. "Increasing the minimum payment from $10 per month to 1% is a small step in the right direction, but consumers need to be paying a lot more per
month if they want to get out of the horrible credit hole they get sucked into by running up debt on their credit card."
For example, if you have a balance of $5,000, an interest rate of 15%, and a minimum payment percentage of 1%, you will pay approximately $112 per month ($50 for the minimum payment and $62 for interest). It will take almost 26 years to pay off your balance and you will pay $5,974.97 in interest. If you increase your payment by just $38 to $150 per month, it will take less than four years to pay off the balance and you will pay $1,508.52 in interest.
"If you are only paying the minimum, you are probably paying more in interest each month than you are toward your balance. The only way you can pay off your debt is to pay more than the minimum. To help you do this, call your credit card company and request a higher minimum," says Hardekopf. "In the next few weeks, if you get a tax refund in the mail, use that to pay down your credit card balance.
"The minimum payment is one of the most misunderstood and poorly explained principles of credit cards," says Hardekopf. "In 2005, new regulations forced credit card issuers into increasing the minimum payment percentage so that at least a small portion of the monthly payment would go toward the balance. Unfortunately, this percentage is difficult to find and is not listed in most terms and conditions. Call your issuer to find out the percentage used for your account, then use a rate calculator to figure out how long it will take to pay off your balance. Most consumers will be shocked to find how long it will take them to pay off the balance by just paying the minimum. While Congress is focused on the credit card industry, they should require credit card companies to provide this calculation on the cardholder's monthly statement."
Posted by Lynn at
10:47 AM
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