Why are credit card companies raising their minimum payments?
This increase in the minimum payments comes as a result of guidelines recently issued to the credit card companies by federal banking regulators. In the past, credit card companies required customers to pay an average of just 2 percent of their total credit card balance, which meant constant debt for many consumers. The 2 percent minimum payment only covered interest and other fees, so it could often take a lifetime to pay off the principal balance. The new guidelines state that monthly minimums should cover interest, any fees or extra charges and at least 1 percent of the principal amount. So essentially, we’re seeing a jump from a minimum payment of 2 percent of the total balance to 4 percent. Believe it or not, these guidelines are meant to help the consumer get out of debt faster. But it may not seem that way, since you’re going to have to dig deeper into your pocket to make the minimum payment each month. How different will the minimum payments be from what people are paying now?
