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
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