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People teetering on the edge of bankruptcy get a shove!


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People teetering on the edge of bankruptcy get a shove!


Be aware that if your payment minimum on a card is now $15 it may soon double to $30.

Credit card minimum payments doubling, BankRate.com, 3 May 05

So far, MBNA, Citibank, and Bank of America have announced they are doubling minimum monthly payments on credit card balances from 2 percent to 4 percent. Others are expected to follow suit quickly. To some cardholders that could be seen as a good thing. To others it could be devastating. . . .

Cause for change

Over the past few years, low minimum payback rates of between 2 and 2.5 percent have encouraged Americans to spend, spend, spend -- and to rack up an average credit card debt of close to $10,000 per household. For the estimated 40 percent of cardholders that carry a balance from month to month, the low minimums free up cash. But paying off a big charge little by ever-so-little also means that a $1,000 debt can turn into a 22-year commitment -- and that you'll accumulate thousands more in interest in the meantime.

"People are now in a revolving debt cycle that they'll never escape," says Adam Brauer, a debtor advocate and in-house counsel for Debt Settlement USA in Scottsdale, Ariz. "So the government nudged credit card companies into saying, 'This isn't working.'"

Specifically, regulators with the Office of the Comptroller of the Currency began pressuring credit card companies to hike up minimum payments. Another incentive for change: The newly enacted Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, which requires credit card companies to post a kind of Surgeon General's warning on monthly statements that notifies consumers about how long they'll be in debt if they make minimum payments."


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