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Credit Card Minimum Payments to Increase This Fall

by Sandra Wellman

If you have any kind of credit card debt, you should read this article so you will be prepared. If you know anyone with more than a little credit card debt, please advise them of this, so they don't get a big shock one day.

To try and save us from ourselves, the Office of the Controller has recommended that credit card companies make their customers pay higher minimum payments, up to double the current amount. This will affect at least 7% of credit card holders who currently only pay the minimum and those who can only afford to pay a small portion over the minimum.

 These days the average consumer has 4-6 credit cards and $8-20 thousand dollars in credit card debt and rising. Paying only the minimum and never charging again will keep you in debt for 30-60 years, depending on interest, late fees and over limit costs.

 The guidelines to raise the credit card minimum payments were made in 2003, but the banks and credit card companies wanted some time to ease into it. Some say, they waited until the new bankruptcy laws were into effect, so they would have less to lose. Thereís no set date when your credit card companies will start increasing your minimum payments, just know they will do it and probably soon. Some already have. Iíve read dates from July to October of this year and many thought it was going to happen last year, so be warned. 

What can you do, if you will not be able to afford the credit card minimum payment increase?

You can try to transfer your balance to a 0 percent balance credit card for up to a year, then make sure the purchase rate is low enough so you don't have to  pay too much interest after that. Here are some credit cards that will do just that. That will help some with the minimum payment, depending on what that bank is doing.  If you don't get approved from one bank, try another, but don't apply for too many if you get declined or it will lower your credit score.

 You can contact your credit card companies to see if any will work out a lower payment for you on a temporary basis. Keep in mind that frequently, when you have payment arrangements like this, they will not let you use your credit card, so keep at least one available for emergencies.

 You can hire a debt consolidation company to get a personal loan for you and pay off all your credit cards. Personal loans usually donít have very low interest rates, like a home equity loan or refinancing your home. If you donít think it will take you too long to pay off or you donít own a home, this may be the way to go. You can also hire these people to make payment arrangements for you or charge off some of your debt. Be careful here, any debt they get ďcharged offĒ for you will show that way on your credit report, lowering your credit score dramatically, and you will have to pay taxes on the charged off amount as income.

 One solution, besides trying to curb your spending, is to either get a home equity line of credit or refinance your home. The interest rates are lower than a personal loan or credit card and spread out farther, so you will pay a much lower monthly payment. You always have the option of paying more than the minimum when you can afford to.

 If your debts are moderate, but you may need more in the future for home repairs, my suggestion would be to go with the home equity line of credit. Get approved for a little more than your debts and expected home repairs, so you wonít have to worry about getting another one for a while. Try to pay more than the minimum whenever you can without risking your cash flow.

 If you have a lot of credit card debt, home repairs that may need to be made, an unstable job or other situation that could make matters much worse at any time, you should probably consider refinancing. If itís been at least a year or more since you purchased or previously refinanced your home you probably have enough equity, depending on where you live of course. Also, if youíve been making your payments on time for the past year or more, youíll have a good payment history and should have a good enough credit score to get a decent rate.

 If you have late payments, you still may want to consider refinancing at a higher rate, as a temporary solution. Your interest rate will probably be much less than your credit card interest, so youíll pay a lower monthly payment and not risk ruining your credit or worse, losing your house. If you pay all your bills on time for the following 1 1/2 to 2 years, you can refinance again to get a better rate.

 If you think that the rise in credit card minimum payments will affect you adversely, try to make a decision on what you are going to do about it soon. The longer you put it off, the harder it will be to deal with in the future.

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