We are pleased to share some great news for consumers! Your credit card minimum payment, which is typically calculated as only 2% of your credit card balance, will be climbing to up to 4% of your credit card balance soon thanks to guidelines set forth by bank regulators. We have been supporting such a change for quite some time.
While this will change will help consumers to potentially save thousands of dollars in interest or finance charges, it will come as a big shock and financial challenge to many consumers who could see their minimum payments double over night. Following is a great article on this subject published yesterday in the Fort Worth Star Telegram. We are proud that
Curtis Arnold, our public relations director, is quoted in the article.
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Posted on Sun, Apr. 24, 2005
Minimum payments on credit cards soon to jump
By Teresa McUsic
Special to the Fort Worth Star-Telegram
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Millions of credit card customers will be getting a big shock in the mail sometime this year: Minimum payments on card balances will be increasing to as much as double soon for all national bank-issued cards. Put in simple terms, if you have a $10,000 balance on a credit card, your minimum payment could double from $200, or 2 percent of the balance, to $400, or 4 percent of the balance. The increase is because of a change in guidelines by bank regulators, including the Office of the Comptroller of the Currency, the Federal Reserve, the Federal Deposit Insurance Corp. and the Office of Thrift Supervision.
"It wasn't in the consumer's interest to have a minimum that did not even pay for the interest, so that when they made the minimum payment it didn't buy down the interest and the balance increased every month," said Kevin Mukri, spokesman for the comptroller. The guidelines went into effect in 2003, but allowed bank card issuers to roll out the new rules slowly. Over the next year, banks will convert their systems to the new payment schedule, Murki said. Regulators do not dictate the percentage of principal and interest that must be paid each month in a minimum payment, but the guidelines say the minimum payment must include all of the interest and part of the principal.
The result will be a minimum payment that is 3 percent or 4 percent of the balance, said Curtis Arnold, founder of U.S. Citizens for Fair Credit Card Terms, which rates credit cards on its Web site,
CardRatings.com. Most card issuers have reduced their minimum payment over the past few years down to 2 percent of the balance, he said. Many cardholders will be taken by surprise by the increase, Arnold said. "With 90 percent of consumers, no matter what the notice is, it will be trashed," he said. "A significant portion of consumers will be in for a big shock."
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