Confusing Credit Card Terms Still Exist
Almost everything about credit cards can be confusing forconsumers. Congress is attempting to create legislation thatwill make the terms and conditions easier to understand. However, it is not just the interest rates and fine print that are difficult to understand. Getting a correct, clear answer from a customer service agent can be just as difficult and frustrating.
A story by the Jane J. Kim in the Feb. 5 edition of the Wall Street Journal said, "American Express, which raised its late fees last year, plans in May to change the minimum payments calculation across its consumer credit cards, which
is likely to increase the minimum amounts due for some cardholders."
Since this could increase payments for some consumers, staff members at Lowcards.com made four phone calls to American Express to find further information about the minimum payment increase. We received four different answers.
Representative #1 said that the minimum payment will increase to 5% effective in May. She stated the current minimum payment is 2.5%.
Representative #2 said that there will not be an increase. If there is ever a change like this, they will let cardholders know.
Representative #3 said there will be an increase to 5% for those who have paid only the minimum balance for the past six months, or who have been late on any payment during this time period.
Finally, an American Express spokeswoman said that there will be an increase for those who have made only the minimum payment for six consecutive months. She said that American Express sent a letter last fall about this to cardholders, explaining the changes that will go into effect six months later, on the April or May monthly statement. The increase will be based on the following "easy-to-understand" formula:
"To calculate the minimum amount due, we first determine the
greatest of:
* 2% of the balance (excluding any over-limit amount and any late fees or over-limit fees);
* the lesser of either:
Current billed finance charges plus 1% of the balance
(excluding from the balance any over-limit amount, any late
fees or overlimit fees, and finance charges); or 4% of the
balance; or $15.
"We then take the greatest value above and add to it any
over- limit fees, any late fees, 1/24th of any over-limit
amount, and any amount past due."
"This is incredibly complex and another example of the confusion the credit card issuers create with their product. Consumers have a lot at risk financially with their credit cards, and issuers must do their part to make all terms clear and easy for cardholders to understand. These shouldn't be a puzzle where you need a PhD in math to calculate what your minimum payment might be," says Bill
Hardekopf, CEO of LowCards.com.
"There are many cardholders who are going to be quite surprised and confused by a higher minimum payment in April or May.
"We are supportive of the higher minimums because this forces consumers to pay off more of their balance and saves them money in the long run by decreasing the interest
payments. We applaud American Express for this move, but are very concerned that consumers don't know what their minimum payments will be with this very complex formula."
A story by the Jane J. Kim in the Feb. 5 edition of the Wall Street Journal said, "American Express, which raised its late fees last year, plans in May to change the minimum payments calculation across its consumer credit cards, which
is likely to increase the minimum amounts due for some cardholders."
Since this could increase payments for some consumers, staff members at Lowcards.com made four phone calls to American Express to find further information about the minimum payment increase. We received four different answers.
Representative #1 said that the minimum payment will increase to 5% effective in May. She stated the current minimum payment is 2.5%.
Representative #2 said that there will not be an increase. If there is ever a change like this, they will let cardholders know.
Representative #3 said there will be an increase to 5% for those who have paid only the minimum balance for the past six months, or who have been late on any payment during this time period.
Finally, an American Express spokeswoman said that there will be an increase for those who have made only the minimum payment for six consecutive months. She said that American Express sent a letter last fall about this to cardholders, explaining the changes that will go into effect six months later, on the April or May monthly statement. The increase will be based on the following "easy-to-understand" formula:
"To calculate the minimum amount due, we first determine the
greatest of:
* 2% of the balance (excluding any over-limit amount and any late fees or over-limit fees);
* the lesser of either:
Current billed finance charges plus 1% of the balance
(excluding from the balance any over-limit amount, any late
fees or overlimit fees, and finance charges); or 4% of the
balance; or $15.
"We then take the greatest value above and add to it any
over- limit fees, any late fees, 1/24th of any over-limit
amount, and any amount past due."
"This is incredibly complex and another example of the confusion the credit card issuers create with their product. Consumers have a lot at risk financially with their credit cards, and issuers must do their part to make all terms clear and easy for cardholders to understand. These shouldn't be a puzzle where you need a PhD in math to calculate what your minimum payment might be," says Bill
Hardekopf, CEO of LowCards.com.
"There are many cardholders who are going to be quite surprised and confused by a higher minimum payment in April or May.
"We are supportive of the higher minimums because this forces consumers to pay off more of their balance and saves them money in the long run by decreasing the interest
payments. We applaud American Express for this move, but are very concerned that consumers don't know what their minimum payments will be with this very complex formula."
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