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Weekly Article for ConsumersMinimums going up on more credit cards BY PAT FERRIER If you were lucky enough to escape a hike in your minimum credit card payments two years ago, the jig is up and the bill is due. About 3 million Bank of America credit card customers are getting a surprise in their June bills - notices that minimum payments are going up. Instead of a base $10 or $15 minimum payment, payments will be based on 1 percent of the balance, plus interest. That means the higher the balance carried on each card, the more you will pay. It's ultimately good for consumers who will pay off high credit balances much more quickly, but painful for those who can't afford the increase, said Sara Allen, executive director of Consumer Credit Counseling Service of Northern Colorado & Southeast Wyoming. The move comes as Bank of America, which merged with credit card giant MBNA, gets more in line with federal banking regulations, said Bill Hardekopf of lowcards.com, an independent Web site that helps consumers compare credit cards. About 10 percent of credit card customers pay the minimum every month, meaning it could take years to pay off high balances, Hardekopf said. "That's one of the poorest financial decisions a person can make," he said. Hardekopf estimated about 3 million of Bank of America's 32 million credit card customers would be affected by the new rate. Other customers' rates already were changed. Consumer Credit Counseling saw some clients affected by the increase two years ago, but none this month. "People mostly adapted," Allen said. "We saw some people struggling because their payments went up all at once. But it wasn't as bad as we expected." Consumers with lower credit-card balances will not be as affected as those with high balances. A minimum payment on $1,000 is 2 percent of the balance, or $20. When the cap is removed July 1, minimum payments will be 1 percent of balance, or $10, plus interest. At 21 percent interest, it would add $17.26 to the minimum payment, which would total $27.26, Allen said. It's not a huge increase on a $1,000 balance, but "it's a big ouch if your payments go from $700 to $1,000," Allen said. "It makes more sense to pay a little more. The 1 percent is good for the credit card balance because it will come down more quickly," she said. "In the long run it will be good for consumers but could be painful initially." Other ArticlesGive your credit score a makeover!A few moves could improve your rating and even save you some cash. Gerri Willis "CNN Money" explains. CNN/Money - Issuers will raise monthly minimum payments to comply with guidance from regulators. Tough Love for Debtors ABC News "Good Morning America's" financial contributor - New Rules Will Double Typical Monthly Minimums |
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